Saturday, 12 November 2016

Whether transfer of property made in violation of injunction order is valid?

Moreover, as against the transfer made pendent lite, the transfer made in violation of injunction order is held to be no transfer in the eyes of the law. The legal position in this respect is well settled that, if any property is alienated in the face of order of interim injunction passed by the Court, such alienation becomes ipso facto illegal and not at all binding on the parties thereto. It confers no right, title or interest on the transferee.
This legal position is very well illustrated in the Division Bench Judgment of this Court in the case of Keshrimal Jivji Shah (supra), to which one of us [Coram : S.C. Dharmadhikari, J.] was a Member.

97. The question raised before the Division Bench in this case was exactly 'as to whether the transfer of an immovable property in contravention of a prohibitory or injunction order of a Court is illegal or void?' It was argued by learned counsel for the petitioner that there is no provision either in CPC or elsewhere which makes transfer of immovable property done in violation of an injunction order or a prohibitory order, null and void. It was contended that the law visits parties acting in violation of orders of Court with serious penalties, in view of the provisions of Order XXXIX Rules 1, 2, 2A of CPC and Bombay Amendment i.e. Rule 11, but it does not render the transaction itself null and void or of no legal effect. It was urged that, once the law does not make such provision, then it is not permissible for the Courts to hold that transfer in favour of petitioners is void. It was further contended by learned counsel for the petitioners in the said case that, the right, title and interest in the immovable property does not come to an end merely because a restraint is placed by Court of law on its alienation or disposal and if this is the legal position, then, there was no impediment in respondent No.2 transferring the said property in favour of petitioners.
98. As against it, learned counsel for the respondent therein has submitted that, a transaction, which is entered into either to defeat the order of Court of law or to violate it, confers no right, title or interest in favour of the transferee. If parties are allowed to claim an advantage from a transaction, which is in violation of an order of Court of law, then, drastic consequences will follow. Entire respect for Rule of law and administration of justice is gone, if, despite prohibitory orders, immovable properties are alienated or disposed of with impunity. Such an approach is contrary to public policy.
99. While dealing with these rival contentions, this Court felt it necessary to refer to the decision of the Hon'ble Supreme Court in the case of Sujit Singh & Ors. Vs. Harbans Singh & Ors., 1995 (6) SCC 50, wherein the Hon'ble Supreme Court was pleased to observe as follows :-
"23. .................. In defiance of the restraint order, the alienation / assignment was made. If we were to let it go as such, it would defeat the ends of justice and the prevalent public policy. When the Court intends a particular state of affairs to exist while it is in seisin of a lis, that state of affairs is not only required to be maintained, but it is presumed to exist till the Court orders otherwise. The Court, in these circumstances has the duty, as also the right to treat the alienation / assignment as having not taken place at all for its purposes. Once that is so, Pritam Singh and his assignees, respondents herein, cannot claim to be impleaded as parties on the basis of assignment.
 Therefore, the assignees-respondents could not have been impleaded by the trial Court as parties to the suit, in disobedience of its orders. The principles of lis pendens are altogether on a different footing. We do not propose to examine their involvement presently. All that is emphasized is that the assignees in the present facts and circumstances had no cause to be impleaded as parties to the suit. ................"
100. The Division Bench in this case also referred to the decision in Ramchandra Ganpat Shinde Vs. State of Maharashtra, 1994 (1) Bom.C.R. 460, wherein the Hon'ble Supreme Court, in paragraph Nos.12 and 13, has observed as under :-
"12. Mr. Justice Arthur J. Venderbilt in his "The Change of Law Reforms 1955" at pages 4 and 5, stated that :
............ It is the courts and not in the legislature that our citizens primarily feel the keen, the cutting edge of the law. If they have respect for the work of their courts, their respect for law will survive the short comings of every other branch of the Government; but if they lost their respect for the work of the courts, their respect for the law and order will vanish with it to the great detriment of society."
13. Respect for law is one of the cardinal principles for an effective operation of the Constitution, law and the popular Government. The faith of the people is the source and succor to invigorate justice intertwined with the efficacy of law. The principle of justice is ingrained in our conscience and though ours is a nascent democracy which has now taken deep roots in our ethos of adjudication - be it judicial, quasi judicial or administrative as hallmark, the faith of the people in the efficacy of judicial process would be disillusioned, if the parties are permitted to abuse its process and allowed to go scot free. It is but the primary duty and highest responsibility of the Court to correct such orders at the earliest and restore the confidence of the litigant public, in the purity of fountain of justice; remove stains on the efficacy of judicial adjudication and respect for rule of law, lest people would lose faith in the courts and take recourse to extra constitutional remedies which is a death-knell to the rule of law."
101. The Division Bench then also made reference to the case of Satya Brata Biswal Vs. Kalyan Kumar Kisku & Ors., AIR 1994 SC 1837, in which, while outlining the importance of rule of law, administration of justice and the role of courts, the Supreme Court has observed :
"29. Apart from the fact whether A.K. Ghosh had a legal authority to sub-lease or not, it was not open to him to grant a sub-lease in violation of the order. It is no use contending as Mr. Chidambaram, learned counsel for the respondents, does, that there was a bar to such a sub-lease under the terms of the status qua order. It has the effect of violating the preservation of status of the  property. This will all the more be so when this was done without the leave of the Court to disturb the state of things as they then stood. It would amount to violation of the order. The principle contained in the maxim : Aactus Curiae Neminem Gravatt" has no application at all to the facts of this case when in violation of status qua order a sub-tenancy has been created. Equally, the contention that even a trespasser cannot be evicted without recourse to law is without merit, because the state of affairs in relation to property as on 15-9-1988 is what the Court is concerned with.
Such an order be circumvented by parties with impunity and expect the Court to confer its blessings. It does not matter that to the contempt proceedings Somani Builders was not a party. It cannot gain an advantage in derogation of the rights of the parties, who were litigating originally. If the right of sub-tenancy is recognized, how is status qua as of 15-9-1988 maintained? Hence, the grant of sub-lease contrary to the order of status-quo is clearly illegal. All actions including the grant of sub-lease are clearly illegal."
102. The Division Bench then expressed its inability to accept the contention of petitioners' counsel that, the decision of the Supreme Court in Sujit Singh's case (supra) should be read as restricted to proceedings under Order XXII Rule 10 CPC and the same cannot be extended to defiance of injunction order issued under Order XXXIX Rule 1 CPC. It was held in paragraph No.26 that;
 "26. ................. Once the issue is placed on the pedestal of public policy and the very faith of litigants in Rule of law and administration of justice, then it is not possible to make the distinction or bifurcation suggested by Shri. Naphade. It would mean that consequences of nullifying such transaction not being provided by the statute, it would not lose its legal efficacy even if it is in utter disregard to or in violation of or breach of prohibitory order or order of injunction issued by a Court of law. It would mean that parties can breach and violate Court orders openly and with impunity and neither they nor the beneficiaries suffer any consequences. It is time that we recognize the principle that transfer of immovable property in violation of an order of injunction or prohibition issued by Court of law, confers no right, title or interest in the transferee, as it is no transfer at all. The transferee cannot be allowed to reap advantage or benefit from such transfer merely because he is not party to the proceedings in which order of injunction or other prohibitory direction or restraint came to be issued. It is enough that the transferor is a party and the order was in force. These two conditions being satisfied, the transfer must not be upheld. If this course is not adopted, then the tendency to flout orders of courts which is increasing day by day can never be curbed. The Court exercises its powers on the foundation of respect and regard for its authority by litigating public. People would loose faith and respect completely if the Court does not curb and prevent this tendency. The note of caution of the Supreme Court  must be consistently at the back of everybody's mind. Therefore, Shri. Naphade is not right in the distinction which he is trying to make." [Emphasis Supplied]
103. The Division Bench was also pleased to reject the contention of the learned counsel for the petitioners therein that, the order of injunction will bind only the transferor and not the world at large, as ownership rights are neither taken away nor restricted in any manner by order of injunction or other preventing directions. It was held that, "the order of injunction reaches and touches a party to the lis. Hence, when during pendency of an order of injunction, immovable property, which is subject-matter of restraint or injunction, is transferred, there is no choice but to declare the transaction as illegal." [Emphasis Supplied].
104. It was further held that, "an order issuing interlocutory injunction is issued with a view to preserve and protect the status-quo during the pendency of litigation. The true effect of such an order is, therefore, preservation of status-quo prevailing as on the date of issuance of the order. Any alteration in the status qua as prevailing and directed to be maintained by the Court of law is not permissible except with leave or sanction of Court. It is well settled that if courts are not to honour and implement their own orders and encourage party litigants, be they public  authorities, to invent methods of their own to short circuit and give a go by to the obligations and liabilities incurred by them under orders of courts, the Rule of law will become casualty in the process - a consequence to be jealously avoided? by all and at any rate by the highest courts in the State."
105. The Court in this case was also pleased to hold that, "the Court cannot allow a party to get away with violation of its prohibitory orders and uphold the transactions contrary to and in violation of its directions on the spacious plea that only way in which the Court can regulate such acts is to visit the guilty party with penalties. It is time that the Courts reach the transaction itself and put an end to purported rights created thereby.
Failing which, it will become possible for the parties to retain fruits and benefits of such acts by suffering penalties. It is well settled that no person can take advantage of his own wrong."
106. Thus, this Court came to the categorical conclusion that a prohibitory order has the effect of placing restriction on powers of disposition and respondent No.2 therein could not have illegally created a sub-lease in favour of the petitioners. In unflinching words, it was held that, "the transfer despite the order of injunction had no legal effect and such transfer was illegal and cannot be recognized. Consequently, transferee gets no valid title nor does he acquire any rights or interests in the immovable property." [Emphasis Supplied].
107. In the case of Satya Brata Biswal Vs. Kalyan Kumar Kisku & Ors.
(supra) relied upon by learned senior counsel for the appellant in this appeal also, the Supreme Court was also pleased to hold that, the granting of sub-lease contrary to the order of status-quo, which was done in the teeth of such order, is clearly illegal and all actions taken, including the grant of sub-lease, are clearly illegal. It was held that, such an order of status-quo, as passed by the Court, cannot be circumvented by parties with impunity and expect the Court to confer its blessings. It does not matter that to the contempt proceedings, sub-lessee was not a party. It cannot gain an advantage in derogation to the rights of the parties, who were litigating originally. [Emphasis Supplied]
108. Thus, it is apparent that, both, "the Principle of Lis Pendens" and "the order of temporary injunction", have not only different objects but the breaches thereof have also different consequences. The transaction made in breach of injunction order is apparently and patently illegal and binds no party, even the purchaser. Whereas, transaction effected during lis pendens does not attract the taint of illegality. It remains legal, valid and binding on the parties, subject to the outcome of the litigation. It also does not entail the consequences of penalty or contempt, as there is no order passed by the Court in Doctrine of Lis Pendens.
109. As a result, from the perspective of litigating parties also, the "Doctrine of Lis Pendens" and "Order of Temporary Injunction" have different effects. The apprehension of action under Section 2A Rule 11 of CPC of attachment of property and the punishment of contempt of courts act as deterrent to the party against whom order of injunction is running.
This deterrent has the further effect of avoiding multiplicity of transactions and procedings. The Doctrine of Lis Pendens does / cannot create such deterrent effect as it does not entail drastic consequence of attachment of property, detention in civil prison, suit being dismissed or defence being struck off, as the case may be, or punishment for contempt of court.
110. Alienation of property lis pendens is merely in the nature of a gamble, which party may willingly enter into without any apprehension of above-said consequences as such party has always the chance of winning the case and thereby retaining the property. The only consequence the party may face, is of loosing that property and nothing more. In that respect also, the transaction will always remain binding  between transferor and purchaser. Therefore, alienee can very much receive purchase-price from transferor as such transaction does not suffer from any taint of illegality. As against it, the order of temporary injunction can and does avoid multiplicity and complications by deterring the party at the threshold itself from entering into transactions, which effect Doctrine of Lis Pendens does not have.
111. The learned Single Judge in the case of Prakash Jawale (supra) has considered in detail some of these Judgments, which make appropriate distinction between the principle of lis pendens and the order of interim injunction in the context of the object and effect of both the provisions on the pending litigation and alienation. Learned Single Judge in Prakash Jawale's case has also considered the above-said Judgment of Keshrimal Jivji Shah, rendered in the case of transfer pendent lite, in the teeth of order of interim injunction as illegal and not binding and thereafter held that, "transfer of immovable property in violation of order of injunction confers no right, title and interest on the transferee, as it is no transfer in the eyes of the law and hence it is no transaction at all. It has to be distinguished from the effect of Section 52 of the TP Act, which does not attach any illegality to a transaction which had taken place pendent lite. Thus, the order of prohibitory injunction grants protection, which is not  available under Section 52of the TP Act, in the event of a transfer pending the suit." In our own analysis of legal position, we, therefore, find the conclusions drawn by the learned Single Judge in Prakash Jawale's case to be based on sound reasoning and in tune with Apex Court's decisions.
Bombay High Court
Shri Prakash Gobindram Ahuja vs Shri Ganesh Pandharinath Dhonde ... on 4 October, 2016
   APPEAL FROM ORDER NO.256 OF 2013
CORAM : S.C. DHARMADHIKARI & DR. SHALINI PHANSALKAR-JOSHI, J.J.
Read full judgment:click here
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