Pend­ing lit­i­ga­tion not al­ways a cloud over prop­erty ti­tle

Section 52 of the Trans­fer of Prop­erty Act, 1882, pro­vides for an ex­cep­tion clause stat­ing that if the court per­mits, the owner of the prop­erty may trans­fer it on the terms laid down by the court

HT Estates - - HTESTATES - Su­nil Tyagi

Gen­er­ally, if a suit or pro­ceed­ing re­lat­ing to im­move­able prop­erty is pend­ing in a court, Section 52 of Trans­fer of Prop­erty Act, 1882 ( TPA) acts as an en­cum­brance when it comes to trans­fer of prop­erty. This section pro­vides that dur­ing the pen­dency of a suit be­fore a court in­volv­ing im­move­able prop­erty, the prop­erty can­not be trans­ferred. It also can­not be dealt with by any party to the suit or pro­ceed­ings and af­fect the rights of any other party under any de­cree or or­der which may be made therein, ex­cept under the author­ity of the court and on such terms as it may im­pose. Section 52 of TPA op­er­ates as a bar on the owner’s right to freely trans­fer the prop­erty in dis­pute dur­ing the pen­dency of lit­i­ga­tion.

It has been of­ten ob­served that in­no­cent par­ties to a le­gal case, whose prop­erty comes under le­gal peril, face such hin­drance. Such per­sons can­not freely trans­fer the prop­erty in dis­pute dur­ing the pend­ing lit­i­ga­tion as such per­son/owner/ seller is likely to re­alise much less than the mar­ket value of the prop­erty, even if buy­ers are avail­able in mar­ket owing to the pen­dency of the suit. Fur­ther, the ob­jec­tive of Section 52 would get de­feated where dis­hon­est lit­i­ga­tors merely to pres­surise the other party file cases with re­spect to im­move­able prop­erty of the other, and thus en­joy the bar under Section 52.

It is due to th­ese cir­cum­stances that an ex­cep­tion to this bar is also laid down in Section 52 of TPA. The ex­cep­tion states that with the per­mis­sion of the court the owner of the prop- erty may trans­fer the prop­erty on such terms and con­di­tions as the court may deem fit and proper de­pend­ing on facts of the case. The judg­ment of the Hon’ble Supreme Court in the case of Vinod Seth Vs Devin­der Ba­jaj has re­in­stated this po­si­tion of law.

In this case, the Hon’ble Supreme Court ex­empted the prop­erty of the de­fen­dant/ re­spon­dent from op­er­a­tion of the bar under Section 52 of TPA dur­ing the pen­dency of civil suit. The suit was orig­i­nally filed by the builder be­fore Delhi High Court, seek­ing spe­cific per­for­mance of an oral agree­ment to re­con­struct premises/prop­erty of the owner. The court found that prima- f acie the builder’s chances to suc­ceed in the case ap­peared to be re­mote and suit was based on spe­cific per­for­mance of an oral agree­ment which was dif­fi­cult for the court to su­per­vise. Prior to the mat­ter reach­ing the Supreme Court, the Hon’ble High Court also ob­served that the own­ers were likely to suf­fer con­sid­er­ably merely owing to the pen­dency of the suit. In this case while lit­tle is at stake for the builder while pur­su­ing the present suit, the own­ers as afore­said would suf­fer, even if they ul­ti­mately suc­ceed.

Courts can­not be silent spec­u­la­tors to the par­ties be­ing put on such un­equal foot­ing and there­fore the Hon’ble High Court di­rected the builder to give an un­der­tak­ing for pay­ing com­pen­sa­tion in the event of fail­ure of the suit, as the pen­dency of the suit in­ter­fered with the own­ers right to en­joy or deal with the prop­erty. The plain­tiff/builder chal­lenged the said or­der of the Hon’ble High Court be­fore the di­vi­sion bench, and the same was dis­missed. There­after, the builder ap­proached the Supreme Court. The Hon’ble Supreme Court ap­pre­ci­ated the novel and in­no­va­tive di­rec­tion given by the High Court, and ex­empted the suit prop­erty from op­er­a­tion of the bar under Section 52 of TPA by di­rect­ing the owner to pro­vide rea­son­able se­cu­rity and thereby grant­ing the owner the lib­erty to deal with his prop­erty in any man­ner, de­spite the pen­dency of the suit.

The said judg­ment is a prece­dent for cases where the im­move­able prop­erty has been put under cloud of pend­ing lit­i­ga­tion and chances of the plain­tiff suc­ceed­ing are minute.

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