http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9  

PETITIONER: R.K.  MOHAMMED UBAIDULLAH & ORS.

       Vs.

RESPONDENT: HAJEE C.ABDUL WAHAB (D) & ORS.

DATE OF JUDGMENT:       18/07/2000

BENCH: Shivaraj V. Patil, D.P.Mohapatro

JUDGMENT:

Shivaraj V.  Patil, J.

     The  unsuccessful Defendants 2 to 5 in both the courts below  in a suit for specific performance are the appellants herein.   Hereinafter  the  parties will be referred  to  as arrayed  in  the original suit No.  241/71.  Briefly  stated the  facts  leading  to  filing of this appeal  are  :   The Plaintiff  filed  the  original  suit in the  Court  of  the Principal   Subordinate   Judge,    Vellore   for   specific performance of the contract and other reliefs.  According to the  plaintiff, the suit scheduled property belonged to  the defendant No.  1.  He is carrying on business in hardware in the premises Door No.  39, Long Bazar, Vellore, the property belonging  to the brother of the first defendant.  He is  in exclusive  occupation  and possession of the  suit  property Door  No.  36 as a tenant of the first defendant from  about 1962  on  a monthly rent of Rs.  200 using it as godown  for his business purpose.  The Defendants 2-4 and the husband of the  5th  defendant are also hardware merchants carrying  on similar  business in adjoining shop Door No.  38.  The first defendant  intended to sell the suit property and  intimated the  plaintiff  about the same and requested him  to  permit intending  purchasers  and brokers to inspect the  property. The  first  defendant  offered to sell the property  to  the Plaintiff also.  The plaintiff intimated Shri Yousuf Sharif, the  husband  of the 1st defendant by letter dated  8.1.1971 that  he was interested in purchasing it.  In July, 1971 one Tangvelli Chetty, the broker of the first defendant informed the  plaintiff that the first defendant was prepared to sell the  property to him.  Therefore, the plaintiff and his  son went  to  the  house of the first defendant  at  Madras  and negotiated.   The  first defendant agreed to sell  the  suit property  to  the  Plaintiff  for a sum  of  Rs.   55,000/-. Accordingly,  the first defendant executed the agreement  on 27.7.1971 having received a sum of Rs.  10,000/- as advance. It  was  agreed that the first defendant should execute  the sale  deed  within  90 days from the date of  the  agreement after  receiving the balance of sale price of Rs.  45,000/-. The  plaintiff  was always ready and willing to perform  his part  of  the  contract.   The first  defendant  refused  to execute  the sale deed even after receiving notice from  the plaintiff for completing the sale transaction taking a stand that the plaintiff had issued a notice asking her to execute the  sale deed before the expiry of the 90 days fixed  under

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9  

the agreement.  According to the first defendant, the notice was  issued  by the plaintiff before the expiry of  90  days only  to  create litigation.  While the  correspondence  was going  on between the plaintiff and the first defendant, the defendants  2  to  4 and the husband of  the  5th  defendant brought  into existence a sale deed executed and  registered on  9.11.1971  for  a sum of Rs.  50,000/- at  Madras.   The first  defendant  dishonestly sold the suit property to  the defendants  2-5  who  had knowledge of the  prior  agreement dated  27.7.71  executed  in favour of the  plaintiff.   The subsequent  transaction  of sale by the defendant No.  1  in favour  of  defendants 2 to 5 was not bona fide.  Hence  the plaintiff  filed the suit for specific performance and other reliefs against the defendants 1 to 5.

     The  first  defendant  filed   the  written  statement resisting  the suit among others that the plaintiff was  not ready  and  willing  to  purchase the property  as  per  the conditions  in the agreement within the specified time of 90 days.   However,  the defence set up by the first  defendant was  struck  off as per order dated 23.7.1974 of  the  trial court passed in I.A.No.  1050 of 1973.

     The  defendants  2  to 4 filed the  written  statement stating  that  the  plaintiff  be put  to  strict  proof  of everyone  of the allegations made in the plaint in regard to the execution of the suit agreement.  They also claimed that they  were  bona  fide purchasers of the suit  property  for value without notice of the prior agreement of sale executed in  favour  of  the plaintiff.  The 5th  defendant  remained absent and ex-parte in the suit.

     The  trial  court  on the basis of  the  evidence  and material  placed  on record held in favour of the  plaintiff that  he  had been always ready and willing to  perform  his part  of  the  contract;  suit agreement was  subsisting  to specifically  enforce  it;  the defendants 2 to 5  were  not entitled  to claim title to the suit property on the  ground that they were bona fide purchasers for value without notice of  the  prior  agreement.  The trial court also  held  that until  the plaintiff acquired title by means of a  document, he  was not entitled to seek for a decree for mesne  profits and damages.  In view of the findings so recorded and taking into  consideration all aspects, the trial court found  that the  plaintiff  was  entitled  for the  relief  of  specific performance.   Hence  a decree for specific performance  was granted in favour of the plaintiff directing the defendant 1 to 5 to execute and register the sale deed in respect of the suit  property  at the plaintiff’s expenses and receive  the balance  of the sale consideration of Rs.45,000/-  deposited in  the court.  The defendants 1 to 5 were also directed  to deliver  formal  possession of the suit property and to  pay Rs.   500/-  as compensation in addition to pay the cost  of the suit.

     The  defendants 2 to 5 filed an appeal No.  509/81  in the High Court of Madras challenging the judgment and decree passed by the trial court.  Cross-objections were also filed by the plaintiff in the said appeal.  During the pendency of the  appeal, the plaintiff died.  His legal  representatives (respondent  nos.   3 to 10 herein) were brought on  record. The  appeal was dismissed confirming the judgment and decree of  the  trial  court.  The cross-objections  filed  by  the plaintiff  were also dismissed.  Hence the defendants 2 to 5 have  brought this appeal to this court.  The 1st  defendant

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9  

(the  respondent  No.   2  in this appeal)  was  deleted  as ordered  on  3.3.1992 on the appellants giving up.   It  was contended on behalf of defendants 2 to 5 that they were bona fide  purchasers  of  the suit property  for  value  without notice  of  the  prior agreement executed in favour  of  the plaintiff;  the trial court as well as the High Court failed to  see  that  the plaintiff was not ready  and  willing  to perform  his part of the contract;  no notice was issued  by the  plaintiff to the defendants 2 to 5 not to purchase  the suit property on the ground that there was a prior agreement to sell the property in his favour;  and that trial court as well as the High court committed an error in concluding that defendants  2 to 5 had notice of the prior agreement on  the basis  that  they  had   overheard  telephonic  conversation between  the plaintiff and the husband of the defendant  No. 1.

     Per  contra,  submissions were made on behalf  of  the L.Rs.   of  the plaintiff in support of and  justifying  the impugned judgment and decree.

     Before  proceeding to appreciate the contentions urged and  the  submissions  made on behalf of the parties  it  is considered  appropriate to state the facts, which are either admitted  or  clearly  established.   The  plaint  scheduled property  is  the  godown premises bearing No.  36  in  Long Bazaar,  Vellore,  belonged  to the  first  defendant.   The plaintiff  is carrying on hard-ware business in the premises bearing  No.  39 in Long Bazar, vellore.  The suit  property is  situate  on the rear side of the said premises No.   39. The  plaintiff  is  storing hardware material  in  the  said premises, using it as a godown having direct access from the shop,  as  a tenant under the first defendant for  about  20 years  prior to the filing of the suit.  The defendants 2 to 4  and the husband of the fifth defendant are also  carrying on  similar  hardware  business in  the  adjoining  premises bearing  No.  38.  The plaintiff filed the suit for specific performance  directing  the defendants to execute  the  sale deed  in  respect of the suit property on the basis  of  the agreement  of  sale dated 27.7.1971, marked as Exhibit  A-3, executed  by  the first defendant for a sum  of  Rs.50,000/- after receiving Rs.10,000/- as advance for the same.  It was agreed  between  the plaintiff and the first defendant  that the sale should be completed within 90 days from the date of the  agreement.  After exchange of notices and on the  first defendant  refusing  to  perform her part  of  the  contract within  the stipulated time in the agreement and she  having sold  the very suit property to the defendants 2 to 5 for  a sum  of  Rs.50,000/- under Exhibit B-1, the sale deed  dated 9.11.1971,  the plaintiff was constrained to file the  suit. The  defendant No.  1 admitted the execution of agreement of sale but contended in a written statement that the plaintiff had  never  been  ready and willing to perform his  part  of contract.   The plaintiff had issued a notice - Exhibit  A-1 dated  19.9.1971  -  much  before  the  expiry  of  90  days stipulated  in  the agreement stating that he was  ready  to perform  his  part  of  the contract and  calling  upon  the defendant  No.   1 to execute the sale deed after  receiving the  balance  consideration  of Rs.45,000/-.  It  is  to  be noticed  that the defence of the first defendant was  struck off  by the order dated 23.7.1974, passed by the trial court in  IA  No.   1050/1973.   The   plaintiff  proved  the  due execution of Exhibit A-3.  The learned counsel appearing for defendants  2  to 4 in the trial court did not  advance  any argument  touching the validity or enforceability of Exhibit

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9  

A-3,  the  suit agreement, as against the  first  defendant. The  defendants 2 to 4 resisted the suit on the ground  that they  were  the bona fide purchasers for the  value  without notice of the agreement.

     After  the  full-fledged  trial, on the basis  of  the evidence and material placed before it and having due regard to  the  circumstances, the trial court concluded  that  the suit  agreement  was  subsisting, the plaintiff  was  always ready and willing to perform his part of the agreement, time was  not the essence of the suit agreement and the plaintiff could specifically enforce it.  The learned trial Judge held that the defendants 2 to 5 were not the bona fide purchasers for  value without notice of the suit agreement and that the plaintiff   was   entitled  for   the  relief  of   specific performance.  The High court in the appeal preferred against the  judgment and decree of the trial court did not find any good  or valid ground either to differ or disagree with  the findings  recorded  and  conclusions reached  by  the  trial court.  Consequently the appeal filed by the defendants 2 to 5  as  well as the cross-objections filed by  the  plaintiff were dismissed by the judgment and decree under appeal.

     The  trial court has considered the contentions of the parties  in  the  light of the pleadings  and  the  evidence elaborately.   The  High  Court, in the appeal,  having  re- appreciated the evidence and the submissions keeping in view the   legal  position,  has  dismissed   the  appeal  by   a well-reasoned  order.  Thus the concurrent findings of  fact are recorded.  Added to this we do not find on the facts and circumstances of the case that the conclusions arrived at by the courts below are unsustainable.

     However,  in  the  light of the  submissions  made  on behalf  of  the  defendants  2 to 5 before us,  we  have  to consider:   1)  whether the defendants 2 to 5 are bona  fide purchasers  of  the  suit property in good faith  for  value without notice of original contract and 2) whether they were not  required  to  make any inquiry as to the  equitable  or further  interest the plaintiff had in the suit property  at the  time  of execution of sale deed (Exhibit B-1) in  their favour,  on  the ground that they were already aware of  the nature of the possession of the plaintiff as a tenant.

     It is not disputed that the plaintiff and defendants 2 to  4  carry on business in hardware in adjoining  premises; only  a  common  wall  separates them.   The  suit  property adjoins  the premises bearing No.  39 where the plaintiff is carrying  on  his business;  he can directly reach the  suit property.   He is using the suit property advantageously  as godown for the last 20 years prior to the filing of suit, as a  tenant.  The plaintiff and defendants are neighbours  not only  in  business  premises but also in  the  residence  in Ramanayakanpalayam  of  the same town as stated in  the  SLP itself.   Agreement (Exhibit A-3) was executed on  21.7.1971 in  favour of the plaintiff and sale deed (Exhibit B-1)  was executed  on  9.11.1971 in favour of the defendants 2 to  5. Husband  of  the  defendant  No.  1 was  dealing  with  sale transactions of the suit property.  He signed Exhibit A-3 as well  as  Exhibit B-1, the suit agreement and the sale  deed respectively.   Similarly  Thangavelu Chetty, a broker,  was also  in  know of Exhibit A-3 And exhibit B-1.  Exhibit  B-1 having  come  into  existence  much later  to  Exhibit  A-3, husband  of  defendant No.  1 and said Thangavelu Chetty  in all  probability might have mentioned about Exhibit A-3, the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9  

agreement,  to  defendants  2  to   5.   The  plaintiff  and defendants  2  to 4 carry on business in adjoining  premises and  the suit property adjoins the premises Door No.  39  on the  rear  side  and  that   they  are  also  neighbours  in residential locality.  In the ordinary course the defendants 2  to  4 would have known about the prior agreement of  sale made  in  favour  of the plaintiff.  It is the case  of  the defendants  2 to 4 that they were aware of the fact that the plaintiff  was in possession of the suit property  occupying it as a tenant for the last several years.  The defendants 2 to  4  did  not make any inquiry if the  plaintiff  had  any further  or other interest in the suit property on the  date of execution of sale deed in their favour apart from that he was  in  possession of the property as a tenant.  The  trial court  took  note  of telephonic  conversation  between  the plaintiff  and  the  husband of the first defendant  on  the basis  of Exhibits A-4 to A-8 - the trunk call bills for the period  16.7.1971 to 15.11.1971 and was of the view that the defendants  came to know of the prior agreement from the eve drop  of conversation as the plaintiff and defendants  carry on  business  in adjoining premises and only a  common  wall separates  the  premises.   The   learned  counsel  for  the defendants  commented on this aspect and contended that  the learned  trial Judge was not right in drawing such inference as  to the knowledge of the defendants 2 to 4 in relation to the  prior  agreement Exhibit A-3.  The trial court did  not solely  rely  on this circumstance as can be seen  from  the judgment.    Several   circumstances,   oral  evidence   and documents  were  taken  into   consideration  for   imputing knowledge of suit agreement to defendants 2 to 5.  The trunk call  bills  during  the  relevant   period,  in  the  given situation  probablised  the  case  of  the  plaintiff   that defendants were aware of Exhibit A-3.

     In  paragraph 6 of the written statement defendants  2 to  4 stated that they had purchased the property only after contacting the plaintiff;  they sought the permission of the plaintiff  to inspect the suit godown informing him of their intention  to  purchase the same from the  first  defendant. The  trial court did not accept this contention and  rightly so  in  our  opinion.  In the ordinary course  a  reasonable prudent person placed in the position of the plaintiff would not  have failed to mention about the existence of the prior agreement  in  his favour particularly when he is using  the very  same godown as a tenant under the first defendant  for the  last  20  years  prior  to  the  filing  of  the  suit. Similarly  the  defendants 2 to 4 intending to purchase  the property  in possession of a tenant would not have failed to make  inquiry  as  to any further interest  in  relation  to possession or title of the plaintiff over the suit property. It  is not uncommon that where a tenant is in possession  of the  property,  that  too  for a long  time,  using  it  for business  purpose would always like to purchase the property getting  all  advantages if offered for sale.  Normally  the landlord  or owner of the property would also be  interested in  selling  the  property to a person in  possession  if  a reasonable  price  is given to avoid litigation and to  have smooth transaction.  In certain statutes even provisions are made  to  give  first  option to a tenant  to  purchase  the property.   In  such situation the defendants 2 to  4  would have made inquiry with the plaintiff about the nature of his possession  and title under which he is in possession on the date  of  sale deed (Exhibit B-1) executed in their  favour. If  they  had  made inquiry plaintiff would  have  certainly revealed  about  Exhibit  A-3  the prior  agreement  in  his

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9  

favour.  If such inquiry was not made it only means that the defendants  2  to  5 willfully abstained  from  making  such inquiry  or they grossly neglected to do so.  The defence of defendants  2  and  4  is  not  consistent  with  regard  to contacting the plaintiff and informing of their intention to purchase  the  property.  Once they took a stand  that  they directly  contacted the plaintiff seeking his permission  to inspect  the suit property and in the evidence of DW-1 it is stated  that they sent their clerk to the plaintiff  seeking permission  to inspect the suit property.  Neither the  name of that clerk was given nor he was examined nor it is stated about the same in the written statement.

     Section  19  of the Specific Relief Act, 1963, to  the extent it is relevant, reads:

     "19.   Relief  against  parties and  persons  claiming under  them  by  subsequent title.  -  Except  as  otherwise provided by this Chapter, specific performance of a contract may be enforced against --

     (a)either party thereto;

     (b)any  other  person  claiming under him 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;

     (c)..........

     (d)..........

     (e).........."

     As  can be seen from Section 19 (a) and (b)  extracted above  specific  performance of a contract can  be  enforced against (a) either party thereto and (b) any person claiming under  him  by a title arising subsequent to  the  contract, except a transferee for value who has paid his money in good faith  and without notice of the original contract.  Section 19(b)  protects  the bona fide purchaser in good  faith  for value  without  notice  of   the  original  contract.   This protection  is  in  the nature of exception to  the  general rule.   Hence  the  onus of proof of good faith  is  on  the purchaser  who  takes  the  plea  that  he  is  an  innocent purchaser.   Good  faith  is  a   question  of  fact  to  be considered  and decided on the facts of each case.   Section 52  of  the Penal Code emphasizes due care and attention  in relation  to  the  good faith.  In the General  Clauses  Act emphasis is laid on honesty.

     Notice  is  defined  in Section 3 of the  Transfer  of Property  Act.  It may be actual where the party has  actual knowledge of the fact or constructive.  "A person is said to have  notice" of a fact when he actually knows that fact, or when,  but for willful abstention from an inquiry or  search which  he ought to have made, or gross negligence, he  would have known it.  Explanation II of said Section 3 reads:

     "Explanation  II - Any person acquiring any immoveable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9  

     Section  3 was amended by the Amendment Act of 1929 in relation  to the definition of ’notice’.  The definition has been  amended and supplemented by three explanations,  which settle  the law in several matters of great importance.  For the immediate purpose Explanation-II is relevant.  It states that  actual possession is notice of the title of the person in  possession.  Prior to the amendment there had been  some uncertainty  because of divergent views expressed by various High  Courts in relation to the actual possession as  notice of  title.  A person may enter the property in one  capacity and  having  a  kind of interest.   But  subsequently  while continuing  in  possession of the property his  capacity  or interest  may  change.   A person entering the  property  as tenant  later  may become usufructuary mortgagee or  may  be agreement  holder  to purchase the same property or  may  be some  other interest is created in his favour  subsequently. Hence with reference to subsequent purchaser it is essential that  he  should make an inquiry as to title or interest  of the  person  in actual possession as on the date  when  sale transaction  was made in his favour.  The actual  possession of  a person itself is deemed or constructive notice of  the title  if  any,  of a person who is for the  time  being  in actual  possession  thereof.  A subsequent purchaser has  to make  inquiry  as to further interest, nature of  possession and  title  under  which  the   person  was  continuing   in possession  on the date of purchase of the property.  In the case  on  hand  defendants 2 to 4 contended that  they  were already  aware of the nature of possession of the  plaintiff over  the suit property as a tenant and as such there was no need  to make any inquiry.  At one stage they also contended that  they  purchased  the  property  after  contacting  the plaintiff,  of course, which contention was negatived by the learned  trial  court  as  well as  the  High  court.   Even otherwise  the  said contention is self- contradictory.   In view  of  Section  19(b)  of the  Specific  Relief  Act  and definition of ’notice’ given in Section 3 of the Transfer of Property  Act read along with explanation II, it is  rightly held  by  the trial court as well as by the High Court  that the  defendants 2 to 5 were not bona fide purchasers in good faith for value without notice of the original contract.

     The  High  Court  of Andhra Pradesh in  Mummidi  Reddi Papannagari  Yella  Reddy vs.  Salla Subbi Reddy and  others referring  to  various decisions in paragraph 8  has  stated thus:

     "It  may  be  mentioned here that an  Explanation  was introduced into the Transfer of Property Act by the Amending Act  21 of 1929.  Even prior to this amendment, the law,  as declared in decided cases, was that, when a person purchased property from the owner knowing that it is in the possession of another, he is under a duty to inquire into the nature of that  possession,  and,  in  the absence  of  such  inquiry, knowledge of title under which possession is held, should be attributed  to  the  purchaser.   The leading  case  on  the subject,  relied  on  in a number of Indian decisions  is  - ’Daniels v.  Davision’, (1809) 16 Ves Jun 249 (B).  The Lord Chancellor held that:

     "Where  there is a tenant in possession under a lease, or an agreement, a person purchasing part of the estate must be  bound  to  inquire  on  what terms  that  person  is  in possession..........that  a tenant being in possession under a  lease,  with  an agreement in his pocket  to  become  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9  

purchaser, those circumstances altogether give him an equity repelling  the  claim of a subsequent purchaser who made  no inquiry as to the nature of his possession"."

     (Emphasis supplied)

     Relying on the decision of this Court a Division Bench of the High court of Madras in Veeramalai Vanniar (died) and others vs.  Thadikara Vanniar and others has held that it is also  the  duty of the subsequent purchaser to inquire  from the  persons  in possession as to the precise  character  in which  he was in possession at the time when subsequent sale transaction  was  entered  into.  If there be  a  tenant  in possession  of land a purchaser is bound by all the equities which  the tenant could enforce against the vendor and  such equity  extends not only to the interest connected with  the tenancy but also to interests under the actual agreement.

     In  Dr.  Govinddas and another vs.  Shrimati Shantibai and others this Court in para 14 has held:

     "14.   It  will  be  noticed   that  the  evidence  is contradictory  and  we have to decide whose version is  more acceptable.    The  learned  counsel   for  the   appellants contended  that  the  onus of proof was very  light  on  the appellants  and  they  had  discharged it  by  entering  the witness-box  and stating that they had no knowledge.  We are unable  to agree with him that in the circumstances of  this case   the   onus  was  light   on  the   appellants.    The circumstances  that tell heavily against the version of  the appellants  are these.  First, all the parties are residents or  have shops in the same vicinity and in places like  this it  is  not probable that the appellants would not  come  to know  of the execution of the agreement (Souda- Chitthi)  of the plaintiff.  Secondly, the haste with which the sale-deed in favour of the appellants was executed was unusual.  It is more  usual  for an agreement to be executed in  such  cases rather  than arrive at an oral agreement on one day and have the  sale-deed  executed  the next day  and  registered  the following  day.   For some reason the appellants were  in  a hurry  to get the deed registered.  What was the reason?  In view  of all the circumstances we are inclined to accept the evidence  Hem  Raj Chauhan, and corroborated by Hayat,  that Goverdhandas knew of the execution of the agreement with the plaintiff on March 1, 1960."

     As  can  be seen from the paragraph, extracted  above, that  in  case of contradictory evidence  the  circumstances have  to  be kept in view in deciding whose version is  more acceptable.   One of the circumstances that was held against the   subsequent  purchasers  was   that  the  parties  were residents  or had shops in the same vicinity and it was  not probable  that the subsequent purchasers would not have come to  know of the execution of the agreement.  In the case  on hand  the  trial court as well as the High Court have  given reasons  based  on  evidence   and  have  indicated  several circumstances  for not accepting the version of defendants 2 to  4 that they had no knowledge of the prior agreement A-3; one  of  the  circumstances  being   that  the  parties  are neighbours  in  place of business as well as in  residential locality.  We have also already referred to that briefly.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9  

     In  view of what is stated above, it is clear that the defendants  2  to 5 were not bona fide purchasers for  value without  prior notice of the original contract and that they were required to make inquiry as to the nature of possession or  title  or further interest if any of the plaintiff  over the  suit  property at the time when they entered into  sale transaction notwithstanding they were already aware that the plaintiff  was in possession of the property as the  tenant. What  is material is the inquiry at the time when subsequent sale transaction was entered into.

     Thus  having regard to all aspects, we do not find any good  or  valid  ground  to disturb or  interfere  with  the judgment  and  decree under appeal.  Hence we confirm  them. Consequently the appeal is dismissed with costs.