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Ram Bilas Ojha And Others v. Bishwa Muni And Others
Factual and Procedural Background
The first defendant (4th respondent) borrowed Rs 1300 from the first plaintiff and executed a sarllat, putting the plaintiff in possession of the disputed plot in lieu of interest. After shifting residence, the 4th respondent expressed a desire to sell the land to the plaintiffs. An agreement for sale was settled at Rs 1700. On 2 June 1964 he accepted Rs 100 as earnest money, and on 3 June 1964 executed a written agreement of sale in the plaintiffs’ favour.
On 4 June 1964, however, the 4th respondent executed a registered sale deed in favour of Defendants 2 to 7 (the present appellants) for Rs 2000. Alleging that this subsequent sale was neither bona fide nor without notice, the plaintiffs filed a suit for specific performance of their 3 June 1964 agreement.
The trial court decreed specific performance, finding that the plaintiffs had been in possession since 1960 and that such possession constituted notice to the appellants. The First Appellate Court and the High Court dismissed the defendants’ appeals. Defendants 2 to 7 then came to the Supreme Court by special leave.
Legal Issues Presented
- Whether Defendants 2 to 7 were bona fide purchasers for value without notice of the prior agreement of sale dated 3 June 1964 in favour of the plaintiffs, and, if not, the effect of such notice on the plaintiffs’ claim for specific performance.
Arguments of the Parties
Appellants (Defendants 2 to 7)
- Contended that the courts below shifted from the plaintiffs’ pleaded case of actual knowledge to a finding of constructive notice, which was beyond the pleadings.
- Argued that the agreement to sell was executed between 5 p.m. and 6 p.m. on 3 June 1964, leaving insufficient time for the appellants to learn of it before the sale deed was executed the following day.
- Maintained that the plaintiffs were not in possession after the execution of the appellants’ sale deed and that the appellants themselves entered into possession immediately.
Respondents (Plaintiffs)
- Alleged that the appellants had full knowledge of the 3 June 1964 agreement and nonetheless proceeded with the 4 June 1964 sale to defraud the plaintiffs.
- Relied on their continuous possession of the land, coupled with a registered usufructuary mortgage, as circumstances sufficient to put any subsequent purchaser on inquiry.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court focused on the appellants’ own case at trial, wherein they asserted that the plaintiffs were not in possession after the sale deed of 4 June 1964. The Court noted that documentary evidence—including a registered usufructuary mortgage in favour of the plaintiffs—proved that the plaintiffs were, in fact, in possession on the date of the appellants’ purchase.
Such possession, the Court held, imposed a duty on the appellants to make inquiries; had they done so, they would have discovered the prior agreement of 3 June 1964. The appellants’ omission, combined with the mortgage’s absence from their sale deed, demonstrated lack of bona fides. Consequently, all three courts were correct in concluding that the appellants were not purchasers for value without notice.
The Court rejected the appellants’ procedural objection (that the plaintiffs pleaded actual rather than constructive notice) by observing that the appellants’ own false denial of the plaintiffs’ possession undermined their credibility and supported the inference of constructive notice.
Holding and Implications
Appeal Dismissed with Costs.
The Supreme Court affirmed the decree of specific performance in favour of the plaintiffs. The immediate consequence is that the 4th respondent must execute a sale deed in accordance with the 3 June 1964 agreement, while the appellants’ subsequent purchase is rendered ineffective against the plaintiffs. The decision turns on established principles of notice to subsequent purchasers and does not announce new precedent, but it reinforces the importance of inquiry where possession is apparent.
P.S Kailasam, J.— The unsuccessful defendants (Defendants 2 to 7) in all the courts below in a suit for specific performance are the appellants by special leave before us.
2. The first defendant (4th respondent) on receipt of a sum of Rs 1300 executed a sarllat in favour of the first plaintiff with condition that the first plaintiff would enter into possession of the said plot in lieu of the interest of the debt. After some time the fourth respondent gave up his residence and moved to a different place and while so doing expressed the desire that he wanted to dispose of the plot aforesaid and made a request to the plaintiff that he should purchase the same. The first plaintiff had already entered into possession and occupied the land. After some time the 4th respondent settled with the plaintiff for the transaction of sale in respect of that plot for a sum of Rs 1700. On June 2, 1964 he received a sum of Rs 100 as earnest money from the plaintiffs. On June 3, 1964 the 4th respondent executed an agreement for sale also in favour of the plaintiffs. As plaintiffs had to pay an additional sum of Rs 300 and as they did not have that amount they stated that they would get the sale deed executed after payment. According to the plaintiffs, Defendants 2 to 7 who are appellants before us because of grievance against the plaintiffs, by a sale deed dated June 4, 1964 purchased the properties for a sum of Rs 2000. The plaintiffs who are Respondents 1 to 3 in this Court filed the suit for specific performance of their agreement for sale alleging that the sale in favour of Defendants 2 to 7 appellants herein, was not bona fide and was with notice. The trial court raised certain issues. The issue relating to this question is Issue 7 which is in the following terms:
“Whether the Defendants 2 to 7 are bona fide purchasers for value without notice? If so its effect.”
3. The trial court answered the issue in the negative holding that as Respondents 1 to 3 were in possession from 1960 it must be held that they were in possession on June 4, 1964 when the sale deed in favour of the appellants was executed. The respondents' possession would have put the appellants on enquiry which if prosecuted would have disclosed a previous agreement and hence they cannot be called the transferees without notice.
4. In the result the suit was decreed by the trial court with costs with a direction for performance of the contract to sell the disputed properties. An appeal was taken by the appellants to the Court of Civil Judge, Gorakhpur. The learned Judge also agreed with the reasoning of the trial court and dismissed the appeal. The second appeal to the High Court also failed and hence this appeal by special leave.
5. In this appeal, Mr Raju Ramachandran, counsel for the appellants, submitted that the courts below proceeded on an entirely different basis than the pleadings in coming to the conclusion that the defendant-appellants purchased the property without bona fides and with notice. He referred to para 10 in the plaint where according to plaintiff the agreement dated June 3, 1964 was executed in the presence of Defendants 2 to 7 and they fully knew it. The plea was reiterated in para 14 where the plaintiffs stated:
“As the defendants have full knowledge of the agreement for sale dated June 3, 1964 they should not have got the sale deed executed. Having deceived the plaintiffs, in order to cause loss to the plaintiffs, they intentionally and maliciously got the sale deed executed on June 4, 1964 and that has no binding upon the plaintiffs.”
6. On the pleadings the learned counsel submitted that the plaintiffs having failed in that plea that the defendants were present at the time of the agreement, they cannot rely on any constructive notice to them. The learned counsel further submitted that taking the facts of the case the agreement by Respondent 4 in favour of Respondents 1 to 3 was between 5 and 6 p.m on June 3, 1964 while the sale deed in favour of the appellants was executed on the next day, there was no opportunity for the appellants to have had knowledge of the transaction which took place on the previous evening that is a few hours before the sale. The contention as presented to us ably by the learned counsel appeared quite attractive, but unfortunately, for the appellants the case set up at the trial and spoken to in their evidence was that after the execution of the sale deed in their favour the contesting respondents had never been in possession of the property, and that after the execution of the sale deed the appellants entered possession of the property in dispute. This plea is obviously false because the evidence discloses that there was a registered usufructuary mortgage executed by the 4th respondent in favour of Respondents 1 to 3 which was in existence on the day of sale in favour of the appellants. This registered usufructuary mortgage should have put the appellants in notice of the possession of the respondents. It was sought to be contended by the learned counsel that even if we (they) had notice of the possession, it would only mean that they were in possession in pursuance of a usufructuary mortgage and not in pursuance of an agreement of sale. This defence would have had some substance if it was taken in the pleadings and spoken to in the evidence. His plea on the other hand was that Respondents 1 to 3 were not in possession. The usufructuary mortgage was not referred to in the sale deed in favour of the appellants. On the facts, therefore, we have no hesitation in coming to the conclusion that all the courts below were right in holding that the appellants were not bona fide purchasers without notice. The appeal is dismissed with costs.
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