TMI Blog2022 (3) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that till 1999, when the Tamil Nadu Urban Ceiling Act was repealed, the agreement was not enforceable. That apart, under the agreement of sale, vacant land, in the aggregate, exceeding the ceiling limit of the Plaintiff, would have to be conveyed to him, attracting the VETO contained in Section 5(3) read with Section 6 of the State Act. It was this view, which was reversed by this Court, following the Judgments, which we have referred to which relate to conditional decrees. This result was arrived at by this Court, after finding that agreement to sell contemplated transfer of the land only after getting exemption. Clause (4) of the Agreement contemplated that the vendor was to obtain permission from the Competent Authority under the Urban Land Ceiling Act. We need not multiply authorities. All that is necessary to notice and find is that when an agreement to sell is entered into, whereunder to complete the title of the vendor and for a sale to take place and the sale is not absolutely prohibited but a permission or approval from an Authority, is required, then, such a contract is, indeed, enforceable and would not attract the shadow of Section 23 of the Indian Contract Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is unlike the requirement of Section 19(1)(b) of the Specific Relief Act whereunder these requirements are relevant - As far as the transfer is made by Defendant 1(b) to the second Defendant in his own right and in so far as Defendant 1(b) was not a party and by the time the sale was effected the period of limitation for impleading Defendant 1(b) had already clearly expired even the principle laid down in the decision of the Madras High Court would not apply and the High Court was not correct in finding that the sale by Defendant 1(b) in favour of second Defendant was hit by lis pendens. Is the second defendant, a bonafide purchaser - HELD THAT:- The sale deed in favour of the second Defendant, cannot be treated as a sham transaction and the finding, in fact, on point No. 2 by the High Court, also that the second Defendant is not a bonafide purchaser. Once we come to the conclusion that the agreement, relied upon by the Plaintiff, cannot be enforced, as to whether, even proceeding on the basis that the sale in favour of the second Defendant was made, not in circumstances which would entitle the second Defendant to set up the case that he is a bonafide purchaser, the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Plaintiff under the contract. By the impugned judgment, the High Court allowed the Plaintiffs appeal and directed the Appellants to execute the sale deed relating to the plaint Schedule property in favour of the Plaintiffs (legal representatives of original Plaintiff). The parties will be hereinafter referred to by their status in the Trial Court. A BRIEF OVERVIEW OF FACTS 3. On 04.04.1979, the plaint Schedule property, which consisted of a site, was allotted to the first Defendant (since deceased), by the Bangalore Development Authority (hereinafter referred to as, 'the BDA'). Based on the allotment, a lease-cum-sale agreement was entered into between the BDA and the first Defendant on 04.04.1979. The first Defendant was put in possession on 14.05.1979. On 17.11.1982, the first Defendant entered into the agreement with the Plaintiff agreeing to execute the sale deed of the site within three months from the date on which, the Plaintiff obtained the sale deed from the BDA. On 01.03.1983 and 26.04.1984, the Plaintiff issued letters to the first Defendant, calling upon her to execute the sale deed. The first Defendant issued letter dated 08.05.1984, intimating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THE CONTENTIONS OF THE APPELLANTS 6. Smt. Kiran Suri, learned Senior Counsel appearing on behalf of second Defendant contended that the finding that the Suit was maintainable, was unsustainable. She contended that an agreement must be lawful, in order that a court may grant specific relief. It's her contention that the agreement is unlawful, being opposed to public policy, and also as it was a bargain, which would defeat the provisions of the law in question, within the meaning of Section 23 of the Indian Contract Act, 1872. She invited our attention to the terms of the lease-cum-sale agreement entered into between the first Defendant and the BDA. She pointed out that there was clear prohibition against the alienation of the site or the plaint Schedule property for a period of ten years. She drew support from the Bangalore Rules of Allotment, 1972 (hereinafter referred to as, 'the Rules'). She pointed out that the court has erred in not noticing that Rule 18(2) proclaims an embargo against alienation for a period of ten years. The very agreement relied upon by the Plaintiff was unlawful, and therefore, the court could not have granted specific performance. She drew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in this regard. 7. Per contra, Shri R. Basant, learned Senior Counsel for the Plaintiff, reminded us that matter is appreciated by the two courts. The finding that there was a valid contract by the Trial Court was not challenged by the Appellants. There is no pleading to justify the argument that the agreement in question was not lawful. He would point out that neither the lease-cum-sale agreement nor the Rules, prohibited the allottee entering into an agreement to sell the site. He pointed out that the Rule, which is relevant to the fact, is Rule 17. Even Rule 18, relied upon by the Appellants, did not stand in the way of the agreement to sell or the sale in favour of the Plaintiff. He also emphasised that it does not lie in the mouth of the Appellants to invoke the proposition that agreement in question was unlawful. He pointed to the findings of the High Court that by his conduct there was complete absence of bonafides in the claim. He pointed out that as correctly found by the High Court, Doctrine of Lis Pendens, applies. He further submitted that, at any rate, if the court found that Lis Pendens did not apply, the fact that the second Defendant has not been found to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power or lease, sell or otherwise transfer any movable or immovable property which belongs to it, and to appropriate or apply any land vested in or acquire by it for the formation of open spaces or for building purposes or in any other' manner for the purpose of any improvement scheme. (3) The restrictions, conditions and limitations contained in any grant or other transfer of any immovable property of any interest therein made by the Board shall notwithstanding anything contained in the Transfer of Property Act, 1882 (Central Act 4 of 1882) or any other law have effect according to their tenor. 11. Section 42 conferred power to make Rules. Following provisions are relevant for the purpose of this case: 42. Power of Government to make rules.--The Government may, from time to time; make rules, not inconsistent with this Act.-- xxx xxx xxx (aa) regulating the allotment or sale by auction of sites by Board; (ab) specifying the conditions, restrictions and limitations subject to which the Board may sell, lease or otherwise transfer movable or immovable property; xxx xxx xxx 12. Initially, bylaws regulating the allotment of sites were published on 08.01.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the commencement of each year. 17. Rule 8 dealt with applications. It contemplated that the applications for allotment of site was to be in Form I. Several details are to be furnished. It included the annual income of the applicant, whether the applicant already owned a house or house site in the city, outside the city and whether he had any share in such property and the value of the share. It further included the query as to whether the applicant's wife/husband/minor child, owned a house or house site inside or outside the city. Since, it may be relevant to the decision at hand, we may advert to the Form. FORM I [See Sub-rule (1) of Rule 8] Form of Application for Purchase of Site To The Chairman, Improvement Trust Board, Bangalore 20 Sir, I wish to purchase a building site measuring........ in ......Extension, Bangalore. I agree to abide by the conditions of allotment and sale of the site contained in Rule 17 of the City of Bangalore Improvement (Allotment of Sites) Rules, 1972, and the terms of the lease-cum-sale agreement; copies of which are enclosed in duplicate. I also enclose the duplicate copies of the conditions of allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish details). 16. Amount of earnest money deposited now (with Challan No. and date). I hereby solemnly declare that all the above information given by me is true. I shall furnish any additional information in my possession which you may require. If there is any delay on my part to furnish the necessary information required by the Board, it will be within the discretion of the Board to reject my application. If, at any time it is found that the information given by me above is incorrect, the Board can cancel the allotment, resume possession of the site and forfeit part or whole of the amount paid by me till then towards cost of the site or deposit. I am aware that under the Rules, I have to build the house myself with my own resources. Signature of Applicant Station ..................... Date .............................. Attested Magistrate of the First Class Date................ 18. Rule 10 dealt with the issue of eligibility for allotment and it reads as follows: 10. Eligibility for allotment.--No person. (1) Who is not ordinarily resident (living independently or with his family members) in the area within the jurisdiction of the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses of persons which included wandering tribes, scheduled tribes, scheduled castes, ex-servicemen, persons domiciled in Karnataka but serving in the Armed Forces of the Union outside the State, State Government servants, Central Government servants and servants of Corporation. 51 per cent was reserved, in other words, in specific percentage terms for these categories. 49 per cent was made available for the general public. Non-availability of applicants was also dealt with. 21. Rule 13 provided for selection of an applicant. The Board was empowered to reject any application without assigning any reason. 22. Rule 17 provides for conditions of allotment. Since, much turns on the impact of this Rule, we would refer to the same. 17. Conditions of allotment and sale of site.-The allotment of a site under these Rules shall be subject to the following conditions.-- (1) The allottee shall within a period of fifteen days from the date of receipt of the notice of allotment, pay to the Board twelve and a half per cent of the price of the site and if no such payment is made the allottee shall be deemed to have declined the allotment. (2) The balance of the value of the site (l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof and a lease-cum-sale agreement in Form II shall thereafter be executed by the allottee and the Board and registered by the allottee. If the agreement is not executed within forty-five days after the Board has intimated the actual measurements and particulars of the site to the allottee, the earnest money paid by the allottee may be forfeited, the allotment of the site may be cancelled, and the amount paid by the allottee after deducting the earnest money refunded to him. Every allottee shall construct a building on the site in accordance with the plans and designs approved by the Board. If in any case it is considered necessary to add any additional conditions in the agreement the Board may make such additions. Approval of the City of Bangalore Municipal Corporation for the plans and designs shall be necessary when the layout in which the site is situated is transferred to the control of the said Corporation. (5) The allottee shall comply with the conditions of the agreement executed by him and the buildings and other bye-laws of the Board or the Corporation, as the case may be, for the time being in force. (6) The allottee shall construct a building within a period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aser of a site, execute a deed of conveyance subject to the restrictions, conditions and limitations specified in Sub-rule (2). (2) The conveyance by the Chairman of a site in favour of an allottee, grantee or purchaser of a site (hereinafter referred to as the purchaser ) shall be subject to the following restrictions, conditions and limitations, namely.-- (a) in the case of a site on which a building has not been constructed.-- (i) the purchaser shall construct a building on the site within such period as may be specified by the Board, as per plans, designs and conditions to be approved by the Board or in conformity with the provisions of the City of Bangalore Municipal Corporation Act, 1949 and the Bye-laws made thereunder; (ii) the purchaser shall not without the approval of the Board, construct on the site any building other than a building for the construction of which the site was allotted, granted or sold; (iii) the purchaser shall not alienate the site within a period of ten years from the date of allotment except by mortgage in favour of the Government of India, the Government of Mysore, the Life Insurance Corporation of India or the Mysore Housing Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee the allotted value of the site and an, additional sum equal to the amount of interest at twelve per cent per annum thereon; and in case covered by Clause (b), the lessee shall pay to the Bangalore Development Authority a sum equal to the amount of interest at twelve per cent per annum on the allotted value of the site.] 24. Rule 19 dealt with voluntary surrender and it read as follows: 19. Voluntary surrender.--An allottee may at any time after allotment, surrender the site allotted to him to the Board. On such surrender the Board shall refund all amounts paid by the allottee to the Board in respect of the said site. 25. The Rules did not apply to disposal of corner sites and commercial sites. 26. We may notice in fact that the City of Bangalore Improvement Act, 1945 came to be repealed by the Bangalore Development Authority Act, 1976. There were certain amendments carried out to the 1972 Rules which need not detain us. THE PURPORT OF THE ABOVE LAW 27. It is clear that what is involved is the allotment of public property. The allottee was to be a lessee. The allottee, during the period of lease, was to pay rent, as provided in Rule 7. Allotment was prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rules or in terms of the agreement, the Board, after issuing a notice to the allottee, calls upon the allottee to execute the sale deed at his cost. If the allottee failed to get the sale deed executed, the Board was to execute the sale deed and recover the cost. 28. Now, the time is ripe to advert to the statutory lease-cum-sale agreement referred to in Rule 17(4). It is in Form II and much turns on its terms and we advert to the same, which has been, admittedly, entered into by the first Defendant with the BDA. FORM II [See Rule 17(4)] Lease-cum-sale agreement An agreement made this...............day of...................................................................................................197.., between the City of Bangalore Improvement Trust Board, Bangalore, (hereinafter called the Lessor/Vendor ) which term shall wherever the context so permits, mean and include its successors in interest and assigns of the ONE PART and .........hereinafter called Lessee/Purchaser (which term shall wherever the context so permits mean and include his/her heirs, executors; administrators and legal representatives) of the OTHER PART;. Whereas, the City of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. The Lessee/Purchaser shall not sub-divide the property or construct more than one dwelling house on it. The expression dwelling house means a building constructed to be used wholly for human habitation and shall not include any apartments to the building whether attached thereto or not, used as a shop or a building of ware-house or building in which manufactory operations are conducted by mechanical power or otherwise. 5. The Lessee/Purchaser shall not alienate the site or the building that may be constructed thereon during the period to the tenancy. The Lessor/Vendor may, however permit the mortgage of the right, title and interest of the Lessee/Purchaser in favour of the Government of Mysore, the Central Government or bodies corporate like the Mysore Housing Board or the Life Insurance Corporation of India, Housing Co-operative Societies or Banks to secure moneys advanced by such Governments or bodies for the construction of the building. 6. The Lessee/Purchaser agrees that the Lessor/Vendor may take over possession of the property with the structure thereon if there is any misrepresentation in the application for allotment of site. 7. The property shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them from the Lessee/Purchaser shall be held by them as security for any loss or expense that the Lessor/Vendor may be put to in connection with any legal proceedings including eviction proceedings that may be, taken against the Lessee/Purchaser and, all such expenses shall be appropriated by the Lessor/Vendor from and out of the moneys of the Lessee/Purchaser held in their hands. THE SCHEDULE Site No................. formed by the City of Bangalore Improvement Trust Board in Block No............. in the............ Extension. Site bound on.-- East by: West by: North by: South by: and measuring east to west.....:...north to south...... in all measuring.... square feet. In witness whereof the parties have affixed their signatures to this agreement. Chairman. The City of Bangalore Improvement Trust Board. Witnesses: 1. 2. Witnesses: 1. 2. Lessee/Purchaser. 29. The question then arises, as to what is the purport of Rule 18. Rule 18, in our view, produces the following effects and is intended to apply as follows: It begins with a non obstante Clause as far as Rule 18(1) is concerned. Rule 18(1) is to apply despite anything w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a)(iii) or Rule 18(2)(b). 30. Now, the question would arise as to the effect of the interplay of Rule 17, the lease-cum-sale agreement and the provisions of Rule 18(1) and Rule 18(2). An allottee begins his innings as a lessee. The terms of the lease are set out in the Rules itself, which we have adverted to. The entire value of the site is to be paid at the very beginning, as already noticed, or within the extended period. However, the allottee continues as a lessee. He is obliged to observe the conditions of the lease-cum-sale agreement. He is obliged to pay rent, as provided in the Rules and also the lease-cum-sale agreement. Under Clause (5) of the lease-cum-sale agreement, the allottee, who is also described as the lessee/purchaser, is forbidden from alienating the site or the building that may be constructed during the period of the tenancy. The period of tenancy is fixed as a period of 10 years from the date of giving possession to the allottee. In other words, an allottee, who is obliged to enter into a lease-cum-sale agreement is prohibited from alienating the site or the building, which may be put up for the period of 10 years. This period of 10 years is adverted to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibition against the alienation. We must remind ourselves that Under Section 29(3) of the Act of 1945, the Transfer of Property Act is eclipsed by the terms of any grant or transfer. The condition against alienation is not to be counted from the date of the execution of the conveyance deed but for the unexpired period, in the case of the lease-cum-sale agreement executed. 32. The impact of Rule 18(3) is to be noticed. This Rule was substituted w.e.f. from 21.12.1976. The Rule contemplates two conditions for its operation. Firstly, it operates without prejudice to the provisions of Rule 17. Secondly, Rule 18(3) applies, notwithstanding anything contained in Rule 18(2). Now, coming to the exact scope of Rule 18(3), it contemplates the existence of either of the conditions mentioned therein. They are-(1) the lessee applies pointing out that for reason beyond his control, he is unable to reside in the city of Bangalore; (2) by reason of his insolvency or impecuniosity, it has become necessary for him to sell the site and or site and the building, if any, he may have put up thereon. 33. We have already explained the scope of Rule 18 and the interplay between Rule 17 and Rule 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be forfeited. No doubt, the Board will refund the balance to the allottee. This is a consequence which is contemplated in Rule 17(6). This power with the Board is kept preserved when an allottee does not put up the building. Thus, Rule 18(3) must be understood as a power with the Board to be exercised with the previous approval of the State Government. Thus, an allottee, as a Rule, is expected to hold up to the promise he has made about his financial capacity to construct the building. Consequences in Rule 17 would remain alive. The power Under Rule 18(3) appears to us to encompass situations of insolvency or impecuniosity, which overtake an allottee after the allotment takes place. In other words, the unplanned and uncontemplated vicissitudes of life may visit him inter alia with insolvency or impecuniosity, leaving with him no other choice but to sell the site or even the site with the building. The fact that power Under Rule 18(3) is not meant to be a mechanical exercise of power, can be discerned from the requirement that 'previous' approval of the State Government is the sine qua non for the BDA exercising its power. THE UNDISPUTED FACTS 34. The BDA made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on the Schedule site. 35. Clause 5 shows that the first Defendant has handed over the original possession certificate to the Plaintiff. Clause 8 recites that the first Defendant has put the Plaintiff in possession of the site on the date of the agreement as part performance of the contract of sale. The first Defendant further covenanted with the Plaintiff that he is entitled to construct a temporary structure on the site. THE CORRESPONDENCE BEFORE THE SUIT 36. The Plaintiff, on 01.03.1983, i.e., within four months of agreement dated 17.11.1982, wrote to the first Defendant as follows: Y. SUBBARAJU ENGINEERING CONTRACTORS 24, 2nd CROSS, KODANDARAMAPURAM, MALLESWARAM, ' BANGALORE-560003 Date: 1.3.1983 REGISTERED POST ACK. DUE To, Smt. Jayalakshmamma, W/o K.T. Krishnappa, Ex. M.L.A., TB Extn., Nagamangala, Mandya District Madam, Sub: Agreement for the sale of Site No. 1588, Block II at Banashankari I Stage Extension-Regarding. You have agreed for the sale of the above site, for which an agreement was made on 17.11.1982 on the condition that you will register the sale deed within 3 months from the date of obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1,50,000/-. 38. On 03.07.1984, the Plaintiff sent a lawyer notice. Clause 4, which we have extracted, in the agreement, was invoked. The Plaintiff pointed out that in terms of the said Clause, the first Defendant was obliged, in the first place, to obtain the sale deed from the BDA and to inform the Plaintiff in writing about having obtained the sale deed. The Plaintiff was also to obtain the Khata Certificate. Period of three months would begin to run only from the said date. The claim of the first Defendant that he had handed over the documents of title, was denied. The further payments, which were made, after having paid ₹ 30,000/- on the date of the agreement, was stated to be unnecessary but it was pointed out that the total sum of ₹ 50,000/- stood paid. It was reiterated that on the date of the sale agreement itself, the Plaintiff was put in possession. The claim that the sale consideration was ₹ 1,50,000/- was denied. The first Defendant, it was pointed out, had committed default in not complying with the terms of the agreement, by obtaining absolute sale deed from the BDA. Legal action was spoken of by the Plaintiff. Lastly, on 14.02.1985, a lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be essence of the contract. The first Defendant was ready and willing to perform her part. It was further alleged that the Plaintiff was not put in possession. The Defendant No. 1(b) son of the first Defendant filed a Written Statement. He refers to the Clause prohibiting alienation for a period of ten years from the date of allotment, and that, absolute rights were not created by the BDA by the allotment. It was further contended that the first Defendant, his mother, was only the lessee of the site and she did not have any right to convey ownership rights. She was not competent to convey the property. It was pointed out that the agreement was a void agreement and could not be enforced. 41. The second Defendant, in his Written Statement, inter alia, pleaded no knowledge about the agreement dated 17.11.1982, providing that the first Defendant must obtain an absolute sale deed from the BDA and it must be intimated in writing to the Plaintiff. The allegation that the Plaintiff was put in possession, was denied as false. Regarding putting the Plaintiff in possession of the possession certificate, the Appellant pleaded no knowledge. It was further pleaded that the first Defendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,00,000/-. In the name of our mother, there is commercial complex at Shehsdripuram. We presently get monthly rent of ₹ 4,50,000/-. The said commercial complex is joint family property.' PW 2 has entered into an agreement to purchase 24 acres land at Tannishandra. He has negotiated to purchase the land at the rate of ₹ 8,00,000/- per acre. At also Ulsoor, they have vacant site of 90,000/- sq.feet. It is quite expensive property PW2 deposes. They are staying at a rented house. At Cunningham Road, they have got a property which is in dispute. Cunningham property is 1,20,000/- sq.feet. It is vacant land. Most importantly PW2 deposes that if decree is denied they will have loss of money. 44. The Appellant (second Defendant) examined as DW1, inter alia, deposed that he owned both irrigated and non-irrigated lands to the extent of 12 acres. He did not own any site or building in Bangalore. He invested amount arrived from agriculture and milk-vending business to purchase this property. His father helped him. On the date of purchase, the possession was handed over to him. Apart from Bettanna, none acted as broker at the time of purchase. He, inter alia, fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is the owner of the site. He denied the suggestion that till day, the legal representatives of the original Plaintiff were in possession of the property. The suggestion that the possession of the site was handed over to Plaintiff, was denied. Defendant 1(b) furnished xerox copy of the possession certificate at the time of negotiations. After receipt of Suit Summons, he was not on talking terms with Defendant 1(a) and Defendant 1(b). Defendant 1(b) disclosed to him that the original possession certificate was lost and, therefore, he gave the duplicate certificate. 45. Defendant 1(b) was examined as DW2. He has deposed about the non-alienation Clause and about the agreement in favour of the Plaintiff for ₹ 50,000/-. At the time of the agreement, there was a shed on the site. It was agreed to execute sale deed in favour of the Plaintiff after getting the absolute sale from the BDA. The BDA was supposed to execute the sale deed after the 10-year lease period. The Plaintiff had not taken any steps to waive-off the non-alienation Clause for the period of 10 years. His father gave consent to the BDA to issue the sale deed only in his name. He knew the Appellant from June, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to get the sale deed from the BDA, she could not cancel the agreement unilaterally. It was further found that the Plaintiff ought to have waited till the expiry of the lease period. It was found, however, that the Plaintiff was always ready and willing, however, at the same time, the first Defendant was not in breach. It was further found that there was no iota of evidence to prove that the Defendant had tried to sell the property in favour of the third party. It was further found that there was no oral agreement of sale for ₹ 1,50,000/- and the Plaintiff was not in breach. This aspect was found against the first Defendant. It was found that the second Defendant was a bonafide purchaser of the site for value without notice of the earlier agreement of sale as well as pendency of the Suit. It was further found that in view of the allotment and the lease-cum-sale agreement, the Plaintiff had no right to file the Suit so as to enforce the agreement to sell during the year 1985. The Plaintiff ought to have waited till year 1989. The first Defendant died on 18.07.1994 without obtaining the absolute sale deed from the BDA. After her death, property stood transferred in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relationship of trustee and beneficiary is involved. Salmond stated the law in these words at p. 352 of his Book (2nd Edn.): So if A employs B to commit a robbery, A cannot sue B for the proceeds. And the position would be the same if A were to vest property in B upon trust to carry out some fraudulent scheme: A could not sue B for an account of the profits. But if B, who is A's agent or trustee, receives on A's account money paid by C pursuant to an illegal contract between A and C the position is otherwise and A can recover the property from B, although he could not have claimed it from C. In such cases public policy requires that the Rule of turpis causa shall be excluded by the more important and imperative Rule that agents and trustees must faithfully perform the duties of their office. Williston in his Book on Contracts (Revised Edn.), Vol. VI, has discussed this matter at p. 5069, para 1785 and in paras 1771 to 1774, he has noted certain exceptional cases, and has observed as follows: If recovery is to be allowed by either partner or principal in any case, it must be where the illegality is of so light or venial a character that it is deemed more opposed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the illegality to make out his claim. 51. In Narayanamma (supra), this Court was considering a Suit for specific performance, which was resisted on the ground that the agreement to sell was contrary to the provisions of the Statute. Section 61 of the Karnataka Land Reforms Act, 1961 provided that no land for which occupancy was granted, shall within 15 years of the order of the Tribunal, be transferred by sale, inter alia. A partition was permitted. Equally, a mortgage could be effected to secure a loan. Drawing support from judgment of this Court in Kedar Nath (supra), this Court, inter alia, as follows: 15. The three-Judge Bench of this Court, after referring to the aforesaid judgments, speaking through M. Hidayatullah, J. (as his Lordship then was), observes thus: (Kedar Nath Motani case [Kedar Nath Motani v. Prahlad Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] AIR pp. 218-19, para 15) 15. The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the Plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge or transfer for a period of 15 years from the date of grant. Sub-section (1) of Section 61 of the Reforms Act begins with a non-obstante clause. It is thus clear that, the unambiguous legislative intent is that no such mortgage, transfer, sale, etc. would be permitted for a period of 15 years from the date of grant. Undisputedly, even according to the Plaintiff, the grant is of the year 1983, as such, the transfer in question in the year 1990 is beyond any doubt within the prohibited period of 15 years. Sub-section (3) of Section 61 of the Reforms Act makes the legislative intent very clear. It provides, that any transfer in violation of Sub-section (1) shall be invalid and it also provides for the consequence for such invalid transaction. 25. Undisputedly, both, the predecessor-in-title of the Defendant(s) as well as the Plaintiff, are confederates in this illegality. Both, the Plaintiff and the predecessor-in-title of the Defendant(s) can be said to be equally responsible for violation of law. 26. However, the ticklish question that arises in such a situation is: the decision of this Court would weigh in side of which party ? As held by Hidayatullah, J. in Kedar Nath Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against this, if the balance is tilted towards the Defendants, no doubt that they would stand benefited even in spite of their predecessor-in-title committing an illegality. However, what the court would be doing is only rendering an assistance which is purely of a passive character. As held by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370], the first course would be clearly and patently inconsistent with the public interest whereas, the latter course is lesser injurious to public interest than the former. CASES OF CONDITIONAL DECREE OF SPECIFIC PERFORMANCE 54. The decision, which first comes to mind and is oft quoted, is the decision of the Privy Council in Motilal v. Nanhelal AIR 1930 PC 287. The Court, in the said case, affirmed the decision of the Judicial Commissioner, decreeing a Suit for Specific Performance, taking note of Section 50 of the Central Provinces Act of 1920, which read as follows and the Court, inter alia, held as follows thereafter: If a proprietor desires to transfer the proprietary rights in any portion of his sir land without reservation of the right of occupancy specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder to complete the title of the vendor and for a sale to take place and the sale is not absolutely prohibited but a permission or approval from an Authority, is required, then, such a contract is, indeed, enforceable and would not attract the shadow of Section 23 of the Indian Contract Act, 1872. CERTAIN OTHER DECISIONS 56. We may examine some of the decisions, which have been referred to by the Respondents. In the decision reported in T. Dase Gowda v. D. Srinivasaiah, a Division Bench of the High Court of Karnataka was considering the Suit for Specific Performance in the context of the very Rules, which arise before us. The Defendant/Appellant in the said case, entered into an oral agreement with the Plaintiff therein on 01.09.1981, to sell the Suit site along with an incomplete structure. The Defendant received certain amounts thereafter. This was followed by a written agreement on 01.10.1981 wherein the Defendant agreed to sell. According to the plaint averments, the Plaintiff was put in possession and he completed the construction. It was the Plaintiff's further case that he was dispossessed by the Defendant. The High Court, under Point 6, considered the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suit for Specific Performance wherein the agreement contemplated execution of sale deed, after the period of non-alienation prescribed under the grant. The Suit was filed, in fact, after the lapse of the period of fifteen years. 59. In Balwant Vithal Kadam v. Sunil Baburaoi Kadam (2018) 2 SCC 82, this Court rejected the contention that the agreement, which was sought to be specifically enforced, fell foul of Section 48 of the Maharashtra Cooperative Societies Act. It was found that an agreement to sell did not create an interest in land unlike a sale. 60. In Punjab Sind Bank v. Punjab Breeders Ltd. and Anr. (2016) 13 SCC 283, this Court was dealing with a case of the effect of violation of the conditions, under which, a one-time settlement was extended. The conditions included the stipulation that the mortgaged property should not be sold for three years without prior permission, inter alia. An agreement to sell was found not to be a sale. 61. In Suraj Lamp Industries (P) Ltd. (2) Through Director v. State of Haryana and Anr. (2012) 1 SCC 656, this Court, while dealing with the effect of what has been described as GPA Sales in Delhi, inter alia, and considering the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes to a conclusion that the transfer or acquisition of land is invalid, he shall make an order declaring the transfer or acquisition to be invalid. (3) On the declaration made by the Mamlatdar Under Sub-section (2),-- (a) the land shall be deemed to vest in the State Government, free from all encumbrances lawfully subsisting thereon on the date of such vesting, and shall be disposed of in the manner provided in Sub-section (4); *** 64. The contention taken by the Defendant was that the Plaintiff was already holding 31 acres and 2 guntas of jairayat land and, therefore, by acquiring the plaint Schedule property by way of the decree the Plaintiff, would hold land in excess of the ceiling area. We may notice the following discussion with specific reference to Section 23 of the Indian Contract Act, in particular: 6. By Section 23 of the Contract Act, consideration or object of an agreement is unlawful if it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent. Both the parties to the contract are agriculturists. By the agreement the Appellant agreed to sell jirayat land admeasuring 41 acres 26 gunt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity that the Respondent may not have disposed of his original holding at the date of the acquisition of title pursuant to the agreement entered into between him and the Appellant will not, in our judgment, render the object of the agreement such, that, if permitted, it would defeat the provisions of any law. The Court, it is true, will not enforce a contract which is expressly or impliedly prohibited by statute, whatever may be the intention of the parties, but there is nothing to indicate, that the legislature has prohibited a contract to transfer land between one agriculturist and another. The inability of the transferee to hold land in excess of the ceiling prescribed by the statute has no effect upon the contract, or the operation of the transfer. The statutory forfeiture incurred in the event of the transferee coming to hold land in excess of the ceiling does not invalidate the transfer between the parties. 9. We hold that a contract for purchase of land entered into with the knowledge that the purchaser may hold land in excess of the ceiling is not void, and the seller cannot resist enforcement thereof on the ground that, if permitted, it will result in transgression of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 if he obtains permission of the Chief Commissioner. Therefore, the agreement for transfer of land does not become invalid by itself. The Defendant 1 after obtaining the property could use it for the intended purpose on obtaining permission of the Chief Commissioner or if no such permission was obtained, he could use the land for the purposes authorised Under Section 22 of the Act. In our opinion, the High Court went wrong in holding that the agreement was opposed to public policy or transfer under the agreement was hit by Section 23 of the Act. Support for our view is available from the decision of this Court in Jambu Rao Satappa Kocheri v. Neminath Appayya Hanammannaver [AIR 1968 SC 1358 : (1968) 3 SCR 706]. The suit by the Plaintiff for declaration that the agreement is bad had rightly been dismissed by the trial court as also the first appellate court and the High Court on an erroneous view reversed the same. In our opinion the suit is liable to be dismissed. 68. We have set out the provisions of the Rules and the lease-cum-sale agreement. Before we deal with the question as to whether the agreement in question, falls foul of Section 23 of the Indian Contract Act, we shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of Article 13 of the Constitution of India but it would also be law Under Section 23 of the Indian Contract Act. 70. Section 10 of the Contract Act declares as to what agreements are contracts and all agreements are declared contracts, if they are made by the free consent of parties competent to contract with a lawful consideration and with the lawful object and not expressly declared to be void under the Contract Act. Section 23 must be read with Section 10. Without the illustrations, Section 23, reads as follows: 23. What consideration and objects are lawful, and what not.--The consideration or object of an agreement is lawful, unless----The consideration or object of an agreement is lawful, unless-- it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. 71. The very first head under which an agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing granted as was the case in the line of decisions commencing with Motilal (supra) and ending with Ferrodous Estates (supra). The Rules contemplate a definite scheme. Land, which is acquired by the Public Authority, is meant to be utilised for the particular purpose. The object of the law is to invite applications from eligible persons, who are to be selected by a Committee and the sites are allotted to those eligible persons, so that the chosen ones are enabled to put up structures, which are meant to be residential houses. It is implicit in the Rules, and what is more, in the lease-cum-sale agreement, that the allottee, who is treated as a lessee Under Rule 7, will remain in possession and, what is more, proceed to fulfil his obligation under the lease-cum-sale agreement and the Rules. The obligations of the allottee/lessee are unambiguous. He has held himself out to be in dire need of a plot of land for the purpose of constructing a residential building. He has to disclose his annual income and any other means indicating his capacity, not only to purchase the site applied for but also to construct the house. He has to respond to the query as to whether any member of the family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and the Rules, what is contemplated is that on events leading up to the stage where the elements of Rule 17(7) are satisfied alone, a right or duty would accrue to the allottee/lie upon the party. However, what is more important in the context of the facts of this case is the following facet. Under the agreement, the parties contemplated and have expressly provided that the Plaintiff was to be put in possession of the site on the date of the agreement, i.e., on 17.11.1982. Did the parties contemplate the construction of the building residential in nature, for the purpose of which, the site was allotted to the first Defendant? Is it not a clear case where enforcing the agreement, as it is, would necessarily result in the first Defendant not acting in accordance with lease-cum-sale agreement, which, she entered into with the BDA and, what is even more crucially important, against the mandate of the law, as contained in the Rules, which contemplated that the allotment was made for the construction of a residential building by the allottee and the construction was to be completed within the period of two years or an extended period? The agreement between the parties contemplated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dictate of the law. The 'sublime' object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non-alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned. 78. Going by the recital in the agreement entered into between the Plaintiff and the first Defendant, possession is handed over by the first Defendant to the Plaintiff. The original Possession Certificate is also said to be handed over to the Plaintiff. The agreement, even according to the Plaintiff, contemplated that within three months of conveyance of the site in favour of the first Defendant, the first Defendant was to convey her rights in the site to the Plaintiff. It is quite clear that the parties contemplated a state of affairs which is completely inconsistent with and in clear collision with the mandate of the law. On its term, it stands out as an affront to the mandate of the law. 79. The illegality goes to the root of the matter. It is quite clear that the Plaintiff must rely upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant to execute the sale deed. There is no mention about the first Defendant attempting to sell the property to anybody. It is noteworthy that the Plaintiff has stated that he intends to sell the property to his nominee. This further indicates that he was not a person who was in need of this site for the purposes of putting up of residential building unlike even the Plaintiff in the case considered by the High Court of Karnataka and relied upon by the Plaintiff, namely, T. Dase Gowda v. D. Srinivasaiah (supra). We have already noticed the command of the law as contained in Rule 18(3) of the Rules read with Rule 17. If an allottee who is treated as a lessee for reasons which are indicated in Rule 18(3) wishes to sell the site (which is applicable in this case as no building has been put up) then he can sell the site only as was provided in Rule 18(3), that is to say, if going by the correspondence by the Plaintiff wherein the first Defendant was called upon to execute the sale deed of the site, this would be clearly in the teeth of Rule 18(3), the scope of which has already explained. The Plaintiff could not have asked for decree commanding the first Defendant to sell the site in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 54 contemplates that when a date is fixed for the performance of the contract, then, the period of limitation begins to run from that date. When such a date is not fixed in an agreement to sell, then, refusal or breach by the vendor will start the clock ticking. 87. However, we may notice, in this regard, what the Court has opined. In Ramzan v. Hussaini (1990) 1 SCC 104, a Bench of two learned Judges of this Court took the view that the word 'date' in Article 54, need not be expressly mentioned in an agreement and it can be found out from the other terms of the agreement. If this were so, there may be merit in the second Defendant contention. In a later decision, a Bench of three learned Judges in Ahmadsahab Abdul Mulla (2) (dead) v. Bibijan and Ors. (2009) 5 SCC 462, has, however, taken the view that the word 'the date' in Article 54, means that the specific date must be indicated in an agreement as the date of performance. No doubt, the Court, in fact, went on to distinguish the earlier decision Ramzan v. Hussaini (supra) and held as follows: Para 5. In Tarlok Singh's case (supra) the factual scenario was noticed and the case was decided after refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid contention. Even absent a plea by the Defendant illegality by putting the contract side by side with the Rules is writ large. IMPACT OF ABSENCE OF PRAYER QUESTIONING REPUDIATION BY FIRST DEFENDANT? 90. The second Defendant has raised a contention that since the first Defendant has repudiated the contract and as the Plaintiff has not prayed for a declaration that the repudiation was bad, the Suit would not lie. Reliance is placed on the judgment of this Court in I.S. Sikandar (Dead) by Lrs. v. K. Subramani and Ors. (2013) 15 SCC 27. In the said judgment, we find that this Court has taken the view that when the vendor has cancelled the agreement, it is incumbent upon the vendee to seek a declaration that the cancellation was illegal. This is what the Court has held: Para 36. Since the Plaintiff did not perform his part of contract within the extended period in the legal notice referred to supra, the Agreement of Sale was terminated as per notice dated 28.03.1985 and thus, there is termination of the Agreement of Sale between the Plaintiff and Defendant Nos. 1-4 w.e.f. 10.04.1985. Para 37. As could be seen from the prayer sought for in the original suit, the Plaintiff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Equally, the Principle of Lis Pendens is, not to be confounded with the aspect of good faith or bonafides. In other words, the transferee or the beneficiary of the property, which is disposed of by a party, cannot set up the case that he acted bonafide or in good faith. This enables the court and the parties in a Suit or a proceeding, which otherwise is in conformity with requirements of Section 52, to proceed in the matter on the basis that the adjudication by the court, will not, in any way, be subverted or delayed, when the day of final reckoning arrives. 94. The cardinal and indispensable requirement, which flows both from Section 52 and the principle, it purports to uphold, is that the transfer or dealing of the property, which is the subject matter of the proceeding, is carried out by a party to the proceeding. Section 52 uses the word 'party' twice. It refers to the disability of a party to transfer or otherwise deal with the property, pending adjudication. This embargo is intertwined with the beneficiary of the veto against such transfer, being any other party thereto. In fact, the Special Bench of the Madras High Court in Manjeshwara Krishnaya v. Vasudeva Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th him whom he represents. The rights which the dead man can no longer own or exercise in propria persona, and the obligations which he can no longer in propria persona fulfil, he owns, exercises, and fulfils in the person of a living substitute. To this extent, and in this fashion, it may be said that the legal personality of a man survives his natural personality, until, his obligations being duly performed, and his property duly disposed of, his representation among the living is no longer called for. Just as many of a man's rights survive him, so also do many of his liabilities; and these inheritable obligations pass to his representative, and must be satisfied by him. As far as the estate of a dead man is concerned, there are two class of persons who are entitled to it, namely, creditors and beneficiaries. A beneficiary possesses a dual capacity, while he may benefit by inheriting the dead man's estate is also liable to the dead man's obligations. He survives even after his death, especially the obligations concerning immovable property. The beneficiaries who are entitled to the residue after satisfaction of the creditors, are of two classes: (1) those nominated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, he also ought to be brought on record as the heir of the deceased Defendant No. 1 when the application was filed by the Plaintiff to bring only him on record as legal heir of deceased Defendant No. 1. Therefore, it is held that in ' the instant case, the estate of the Defendant No. 1 was represented through Defendant No. 1(a) in the suit and that the alienation made by Defendant No. 1(b) to Defendant No. 2, even in the absence of Defendant No. 1(b) being made a party to the suit has no significance. That apart, it is also noted from the evidence of Defendant No. 2, who has deposed as DW-1, that when the talks for the sale of the suit property took place in June, 1996, Defendant No. 1(a) along with Defendant No. 1(b) and the broker Battanna were present. The reason as to why Defendant No. 1(a) did not disclose about the pendency of the suit when he was by then arrayed as the legal heir of deceased Defendant No. 1 in the said suit is for obvious reasons. Defendant No. 1(a) did not disclose about the pendency of the suit to Defendant No. 2 only with an intention to deprive the right of the Plaintiff in the suit property i.e., by creating third party rights in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply... 98. Thereafter, the Court concluded that in the circumstances, Section 52 of the TP Act squarely applied. 99. It would appear that the High Court has, in arriving at the finding that the transfer in favour of the Appellant is hit by lis pendens, taken into consideration the Doctrine of Notice/Constructive Notice. We have already observed that the Doctrine of Notice and Constructive Notice would be inapposite and inapplicable. Neither the fact that the transferee had no notice nor the fact that the transferee acted bonafide, in entering into the transaction, are relevant for applying Section 52 to a transaction. This is unlike the requirement of Section 19(1)(b) of the Specific Relief Act whereunder these requirements are relevant. 100. The decision of the Madras High Court in Nallakumara Goundan (supra) turned on in its own facts as indicated by the said court itself. In other words, that was a case where even within the period of limitation for substitution of the legal representative of a deceased party in a suit, the legal representative purported to deal with the property. It was in the said context that the court proceeded to hold that lis pendens would appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holds otherwise. The purchase of the Suit site is purported to be made by the second Defendant on 17.09.1996. The High Court, after going through the evidence, enters the following findings. The negotiations took place first time in June, 1996 and, at that time, the Suit was pending. The BDA has not yet registered the conveyance in favour of Defendant 1(b). Even before the BDA executed the sale deed in favour of Defendant 1(b), he had decided to enter into the agreement. The conveyance in favour of Defendant 1(b) was entered only on 14.06.1996 and he executed the sale deed in favour of the second Defendant on 19.09.1996. The second Defendant has deposed that he met not just DW2 along with the broker but he had also met the father of DW2, viz., Defendant 1(a), who was arrayed as the legal representative of the first Defendant. Only photocopies of documents were given to the second Defendant before the sale. Defendant No. 2 did not make any inquiry about the original. It must be presumed that second Defendant had notice of the agreement to sell the Site in respect of which the Decree for Specific Performance was sought. The Court, then, referred to Section 3 of the TP Act and bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the second Defendant, is a sham transaction. A sale deed, which is a mere sham and a purchase, which is not bonafide, are two different things. In the case of sham transaction, no title is conveyed to the purchaser. In the case a sale transaction, which is not a sham, the title of the transfer is, indeed, conveyed to the transferee. A purchase may be bonafide or not bonafide. In a sale, which is not a bonafide, words bonafide sale , is used in the context of pending Suit and from the point of view of Section 19(1)(b) of the Specific Performance Act. It is difficult to dub it as a sham transaction. A transaction cannot be a sham transaction and a sale, which is afflicted with absence of bonafides, at the same time. Even proceeding on the basis that the second Defendant was not a bonafide purchaser, it is not the same thing as holding that it is a sham transaction. 103. In the plaint, which was amended, the Plaintiff has averred, inter alia, as follows: 10C. The Plaintiff submits that taking advantage of the fact that the son was not on record, the husband accorded no objection in favour of the BDA so as to ensure that the Sale Deed was executed in favour of HK Sudarsha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant. It is further the case of the second Defendant that construction was made and he is living in the property since more than 17 years. The value of the property is stated to be about 2.5 crores. 105. Per contra, the learned Senior Counsel for the Plaintiff, would support the finding of the High Court. It was pointed out that the High Court is the final fact-finding Court. 106. We have already found that the sale in favour of the second Defendant is wrongly found to be a sham transaction, a case, which even the Plaintiff did not have. If it is not a sham transaction and the issue is, as to whether the second Defendant, is not a bonafide purchaser, the following aspect looms large. 107. We have already found that the agreement to sell dated 17.11.1982, is to be painted with the brush of illegality and pronounced unenforceable. It is undisputed that the Plaintiff has paid ₹ 50,000/- on the strength of the said agreement. It would appear to be true that a part of this amount was received on the date of the agreement. It may be true that further amount were received by Defendant 1(a), the husband of the first Defendant. The first Defendant died pending the Suit. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been granted Under Article 136 that is when the court considers an appeal the court would not be oblivious to the special nature of the jurisdiction it exercises. It is not axiomatic that on a case being made otherwise that the court would interfere. The conduct of the parties and the question as to whether interference would promote the interests of justice are not irrelevant considerations. Being the final court, it is not without reason that this Court is accordingly also clothed with the extraordinary powers Under Article 142 to do compete justice between the parties. 110. There is another aspect which is also projected by the Plaintiff which must receive our attention. The Plaintiff sought to persuade us should the court find the agreement to sell unenforceable for the reason that it falls foul of Section 23 of the Contract Act, it may declare the law but not interfere with the judgment of the High Court. 111. We are of the view that on both these grounds we are not with the Plaintiff. It is not a case where the condition of the Plaintiff is such that the interests of justice would overwhelm our findings that the agreement relied upon by the Plaintiff constituted a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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