Section 27 of the Specific Relief Act — Historical Evolution, Doctrinal Foundations, and Contemporary Relevance

Section 27 of the Specific Relief Act — Historical Evolution, Doctrinal Foundations, and Contemporary Relevance

I. Introduction

Section 27 of the Specific Relief Act has travelled a long legislative journey. Under the Specific Relief Act, 1877, the provision (particularly s. 27(b)) dealt with enforceability of contracts against subsequent transferees. The 1963 repeal and re-enactment altered the internal architecture: protection of prior contracts vis-à-vis transferees now appears in s. 19(b), while the renumbered s. 27 concerns rescission of contracts. Nevertheless, the “spirit” of old s. 27(b) continues to dominate litigation on specific performance where property has meanwhile been alienated. The jurisprudence surrounding the former clause therefore remains critical to contemporary practice, and courts continue to cite the old cases for guidance on s. 19(b).

This article analyses the provenance, structure, and doctrinal import of Section 27 (old and new), drawing on leading Supreme Court and High Court decisions, statutory cross-references, and academic commentary. Particular focus is placed on the tri-partite requirement that a subsequent purchaser must be (i) a transferee for value, (ii) have acted in good faith, and (iii) be without notice of the prior contract, failing which the purchaser takes subject to the original promise. The discussion also situates Section 27 within the wider matrix of the Transfer of Property Act, 1882 (“TPA”), the Indian Trusts Act, 1882, and related procedural provisions.

II. Statutory Background

1. The Specific Relief Act, 1877 (Repealed)

Section 27(b) read:

“…specific performance of a contract may be enforced against any other person claiming under [the promisor] 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.”

The clause thus created a negative exception: unless the subsequent transferee satisfied all three criteria (value, good faith, absence of notice), he was bound by the earlier contract.

2. The Specific Relief Act, 1963

  • Section 19(b) substantially reproduces the earlier s. 27(b) language, thereby continuing its practical relevance.
  • Section 27 (rescission) now empowers courts to rescind contracts inter alia when they are voidable or terminable by the plaintiff.
  • Section 28 supplements rescission by enabling further relief post-decree.

Consequently, references in pre-1963 case law to s. 27(b) are, post-1963, to be read as s. 19(b) mutatis mutandis, while contemporary s. 27 addresses a different remedial question (rescission).

III. Core Elements of the “Protected Transferee” Defence

1. Transfer for Value

The transferee must have paid the whole of the consideration. Part-payment or payment secured by mortgage will not suffice (Futnani Dairy Farm v. Rangaswamy Nadar, 1993 Mad HC)[1].

2. Good Faith

Indian courts equate good faith with the definition in s. 3(22), General Clauses Act, 1897: acts done honestly, whether negligently or not. However, where enquiries that a reasonable person would make are studiously avoided, courts treat the conduct as lacking good faith (Babasah v. Akbar Sahib, 1923 Mad HC)[2].

3. Absence of Notice

Notice may be actual or constructive (s. 3, TPA). Possession by the prior contract-holder or his tenant generally constitutes constructive notice, imposing a duty to investigate (Gadde Sitayya v. Kotayya, 1931 Mad HC)[3]. The burden of proving the composite defence (value, good faith, no notice) lies squarely on the transferee (Thiruvenkatachariar v. Venkatachariar, 1914 Mad HC)[4].

IV. Interrelationship with Other Statutes

1. Transfer of Property Act, 1882

Section 40, para 2, declares that a transferee with notice takes subject to the obligation. Courts often read s. 19(b) and s. 40 together for harmonious construction (Varadaraja Iyengar v. Lakshminarayana Setty, 1985 Kar HC)[5].

2. Indian Trusts Act, 1882

Section 91 imposes “obligations in the nature of trusts” on transferees with notice. The Supreme Court in Lala Durga Prasad v. Lala Deep Chand[6] invoked s. 91 to elucidate why a transferee with notice must join the conveyance in a decree for specific performance.

V. Judicial Elaboration of Section 27/19(b)

1. Formulation of Decrees

In Lala Durga Prasad the Supreme Court laid down that both vendor and subsequent purchaser with notice must execute the conveyance to pass good title to the plaintiff. This “tripartite decree” approach has become settled law.

2. Pleading Requirements

Madras High Court decisions such as Sanga Thevar v. Thanckodi Ammal[7] emphasise that the plaint must specifically aver the three negative facts against the transferee; absence thereof may be fatal at the threshold. Contemporary courts echo this insistence on precise pleadings (cf. Delhi HC in Vipul Infrastructure v. Rohit Kochhar, 2008, though in the context of s. 22).

3. Burden of Proof & Standard of Evidence

The Supreme Court has repeatedly affirmed that once the plaintiff proves the prior contract, the evidentiary onus shifts to the transferee (e.g., B.L. Sreedhar v. K.M. Munireddy, 2002)[8]. Constructive notice through possession or ready availability of title deeds suffices to defeat the defence of want of notice.

4. Partial Performance and Section 12 (Specific Relief Act, 1963)

When part of the property has passed to a protected transferee and the remainder remains with the original vendor, courts must consider whether partial specific performance is permissible under s. 12 (Subramania v. Kanappa Udayar, 1972 Mad HC)[9]. The discretion is narrow: specific performance will usually be refused unless the plaintiff is willing to accept abatement and no serious prejudice ensues.

5. Injunctions versus Specific Performance

The Supreme Court in Anathula Sudhakar v. P. Buchi Reddy[10] clarified that suits confined to injunctions are inappropriate forums to decide title or enforce prior contracts against transferees. Where title is under cloud, plaintiffs must seek declaratory and consequential reliefs—often invoking s. 19(b)—rather than a bare injunction.

6. Inter-temporal Transactions and Doctrine of Lis Pendens

While s. 52 TPA (lis pendens) protects pending suits, s. 19(b) applies even where the alienation occurs before litigation commences. Courts thus utilise both provisions to ensure that decrees are not rendered ineffectual by strategic transfers (see discussion in Gullipilli Ramulu v. Venkatasubba Rao, 1944 Mad HC)[11].

VI. Rescission under Contemporary Section 27 and its Interface with Section 28

Post-1963, s. 27 allows rescission where the contract is voidable, unlawful, or where the plaintiff cannot specifically perform. Once a decree of specific performance has been passed, s. 28 facilitates rescission if the purchaser defaults, while simultaneously enabling the purchaser to seek possession and other reliefs in the same suit. The Supreme Court in Babu Lal v. Hazari Lal Kishori Lal[12] treated s. 28 as a complete in-suit code, obviating separate execution proceedings—a principle later amplified by the Delhi High Court in Vikas Aggarwal v. Bal Krishna Gupta, 2020.

VII. Contemporary Challenges and Policy Considerations

  • Information asymmetry in land markets: The onus-shifting model of s. 19(b) presumes that purchasers are best placed to undertake due diligence; digital land-record initiatives may recalibrate judicial expectations of “reasonable enquiry”.
  • Interface with registration law: The priority rules in ss. 47, 48, Registration Act, 1908 occasionally conflict with equitable considerations under s. 19(b). Courts continue to prefer the equitable rule where bad faith is shown (Satya Mandalini v. Sahadur Mondal, 1962 Cal HC).
  • Balance between commercial certainty and equity: Supreme Court decisions such as K.S. Vidyanadam v. Vairavan[13] and A.C. Arulappan v. Ahalya Naik[14] highlight the court’s equitable discretion under ss. 20–23. Where the plaintiff is dilatory or inequitable, specific performance—despite a technically valid claim under s. 19(b)—may still be refused.

VIII. Conclusion

Although s. 27 of the Specific Relief Act, 1963 is presently devoted to rescission, the legacy of old s. 27(b) lives on through s. 19(b). Indian courts have forged a sophisticated equitable regime protecting prior contracts against opportunistic alienations while safeguarding bona fide purchasers. The tripartite defence—value, good faith, and absence of notice—operates as a stringent shield for plaintiffs yet accommodates commercial certainty by protecting diligent purchasers. Future reforms should clarify overlaps with registration law and codify evolving standards of due diligence in an era of digitised records.

Footnotes

  1. Futnani Dairy Farm & Anr. v. P. Rangaswamy Nadar & Anr., 1994 MLJ 119 (Mad HC).
  2. Babasah v. Hajee Mahomed Akbar Sahib, 1923 MLJ 45 157 (Mad HC).
  3. Gadde Sitayya v. Gadde Kotayya, 1931 SCC OnLine Mad 59.
  4. Thiruvenkatachariar v. Venkatachariar, AIR 1914 Mad 634.
  5. Varadaraja Iyengar v. Lakshminarayana Setty, 1985 (2) Karnataka LJ 430.
  6. Lala Durga Prasad & Anr. v. Lala Deep Chand & Ors., (1954) SCR 360.
  7. Sanga Thevar v. Thanckodi Ammal, 1952 SCC OnLine Mad 2.
  8. B.L. Sreedhar & Ors. v. K.M. Munireddy (Dead) & Ors., (2003) 2 SCC 355.
  9. Subramania v. Kanappa Udayar, AIR 1972 Mad Sup 347.
  10. Anathula Sudhakar v. P. Buchi Reddy, (2008) 4 SCC 594.
  11. Gullipilli Ramulu & Ors. v. Kokku Venkatasubba Rao & Ors., AIR 1944 Mad 173.
  12. Babu Lal v. Hazari Lal Kishori Lal, (1982) 1 SCC 525.
  13. K.S. Vidyanadam & Ors. v. Vairavan, (1997) 3 SCC 1.
  14. A.C. Arulappan v. Ahalya Naik (Smt.), (2001) 6 SCC 600.