Introduction
The Supreme Court of India recently held that the doctrine of lis pendens applies from the date of filing a suit, not from the date when the court passes an order of injunction. Consequently, transactions executed by a Defendant during the pendency of a suit are affected by the doctrine of lis pendens. As a result, the transferees cannot claim to be bona fide purchasers for valuable consideration to seek protection under Section 41 of the Transfer of Property Act, 1882.

Facts in a Nutshell
On 10th April 2002, the original Plaintiff and the original first Defendant entered into an agreement to sell a plot of land. Part of the consideration was paid by the Plaintiff at the time of signing the agreement, and the remaining consideration was to be paid at the time of execution of the sale deed, which was to be executed on or before 10th November 2004. After the agreement to sell, but before the execution of the sale deed, the original Plaintiff received knowledge that the original Defendant was likely to alienate the suit property and filed a suit for permanent injunction on 21st July 2003. On 28th July 2003, the court passed an order of temporary injunction. On the same day, the original Defendant executed a release deed in favour of his son, for which mutation was sanctioned. Subsequent to the release deed, the son of the original first Defendant executed a registered sale deed on 16th June 2004 in favour of third-party purchasers for the same land.

The original Plaintiff then filed a suit for specific performance against the original vendor, the original first Defendant, his son, and the third-party purchasers, as the original vendor had not come forward to execute the sale deed. In this suit, the original vendor disputed the agreement to sell, and the third-party purchasers sought protection under Section 41 of the Transfer of Property Act, 1882. The trial court decreed the suit in favour of the original purchaser. No appeal was preferred by the original vendor, but one was preferred by the third-party purchasers. The appeal was dismissed. While dismissing the appeal, the appellate court observed that the third-party purchasers had colluded to defeat the claim of the original Plaintiff. The third-party purchasers filed a second appeal before the Punjab and Haryana High Court. The High Court reversed the concurrent judgements of the trial court and the first appellate court, holding that the original Plaintiff was entitled to a refund of the earnest money with interest. While doing so, the High Court observed that there was no evidence on record regarding the time when the injunction order was passed by the trial court and when the release deed was executed in favour of the son of the original vendor. Furthermore, the High Court observed that the violation of an injunction order passed by the courts would not render the transaction void ab initio, and at best, proceedings under Order 39 Rule 2A of the Code could be initiated by the aggrieved party. Moreover, the injunction order dated 28th July 2003 had lost its effect the moment the suit for permanent injunction was later dismissed in 2004. The original Plaintiff had failed to cite any provision in law or precedent indicating that if a suit property is transferred in favour of the vendee of a litigant claiming bona fide purchaser during the pendency of earlier litigation, he is not entitled to protection under Section 41 of the Transfer of Property Act, irrespective of whether he was aware of the pendency of that litigation or otherwise.

Against the judgement of the High Court, the original Plaintiff preferred a Civil Appeal before the Supreme Court of India. The Supreme Court reversed the judgement of the High Court and reinstated the concurrent judgements of the trial court and the first appellate court.

Issue for consideration:
The Supreme Court considered the provisions of Sections 41 and 52 of the Transfer of Property Act, 1882. Section 41 deals with transfer by ostensible owner, whereas Section 52 deals with the transfer of property pending suit relating thereto. The Supreme Court examined judgements of the Hon’ble Supreme Court in Rajendra Singh versus Santa Singh AIR 1973 SC 2537, Devraj Dogra versus Gyan Chand Jain (1981) 2 SCC 675, Sunita Jugalkishore Gilda vs. Ramanlal Undoji Tanna (2013) 10 SCC 258, and Shivshankara and another versus H.P. Vedvyasa Char 2023 SC Online SC 358 to elucidate that the principle of lis pendens is based on equity and good conscience. The Hon’ble Supreme Court further observed that there can be no doubt that even if Section 52 of the Transfer of Property Act is not applicable in its strict sense, the principles of lis pendens, which are based on justice, equity, and good conscience, would certainly be applicable.

Court’s Analysis
The Hon’ble Supreme Court clarified that, keeping in mind the explanation to Section 52 of the Transfer of Property Act, the pendency of a suit shall be deemed to have commenced from the date on which the Plaintiff presents the suit. Furthermore, such pendency would extend until a final decree is passed and such decree is realised. In the present case, the suit for permanent injunction was filed on 21st July 2003, which is prior to the execution of the release deed. The alienation made by the original vendor in favour of his son would be covered by the doctrine of lis pendens. Subsequently, the son of the original vendor executed the sale deed in favour of the third-party purchasers during the pendency of the order of temporary injunction. Thus, once it is held that the transactions executed in favour of the third-party purchasers are illegal due to the doctrine of lis pendens, the defence taken by the third-party purchasers that they are bona fide purchasers for valuable consideration and entitled to protection under Section 41 of the Transfer of Property Act is liable to be rejected.¹

By - Chaitanyaa Bhandarkar