Summary
An allottee agreed to sell a public residential site on terms inconsistent with her statutory obligation to build and retain it during the lease period. The Court held that the particular bargain defeated the statutory allotment scheme and was unenforceable under Section 23 of the Contract Act, notwithstanding that an agreement to sell ordinarily transfers no title. It rejected the High Court’s specific-performance decree and its unpleaded sham-sale finding. In place of the trial court’s refund decree, it awarded the plaintiff’s heirs Rs20 lakh on the case’s peculiar equities.
Issues
- Whether the site-sale agreement defeated the statutory allotment rules and was enforceable.
- Whether lis pendens or the subsequent purchaser’s alleged want of good faith supported specific performance.
- What monetary relief should follow refusal of enforcement.
Provisions considered
- Sections 10 and 23, Indian Contract Act, 1872Statutory rules are law for Section 23; enforcing this bargain would defeat their mandatory residential-allotment scheme. (¶¶ 68-82, 89)
- Rules 7, 17 and 18; Form II, clauses 3, 5 and 12, City of Bangalore Improvement (Allotment of Sites) Rules, 1972The allottee’s building, tenancy and restricted-transfer obligations could not be bypassed by the particular agreement for possession and sale of the bare site. (¶¶ 16-35, 73-82)
- Section 52, Transfer of Property Act, 1882Lis pendens subjects a transfer to the litigation’s result rather than rendering it void; the subsequent vendor was not a party at the material time, and the High Court’s application was erroneous on these facts. (¶ 92-100)
Held
- A statutory rule falls within law under Section 23. The agreement was not saved merely because agreements to sell ordinarily create no proprietary interest: its actual terms frustrated the allottee’s obligation to construct a residence and treated the public site as a speculative property transaction. The illegality went to the root of the claim. (¶¶ 68-82, 111-112)
- Conditional specific-performance decrees may be possible where transfer requires permission rather than being prohibited. That principle did not validate this bargain. The Court distinguished a hypothetical agreement preserving the allottee’s building obligations and contemplating sale of the completed property after the restricted period. (¶¶ 54-65, 74-82)
- The illegality issue could be considered on the undisputed facts and statutory rules. The Court did not rest its decision on prematurity, limitation or absence of a separate prayer against repudiation. (¶ 83-91)
- Lis pendens is distinct from notice or good faith and does not annul the transfer itself. The High Court erred in applying it to the son’s sale when he was not then a party on the facts found. Its additional sham-sale finding was outside the pleadings and distinct from lack of bona fides. Whether the purchaser was bona fide required no further decision because the original contract was unenforceable. (¶ 92-108)
- The defendants had not challenged the trial court’s monetary decree. Considering the payment made long earlier, property value and the parties’ conduct, the Court replaced that relief with Rs20 lakh payable within three months, with 8 per cent annual interest thereafter on default. Specific performance was refused. (¶ 109-114)
Result
Appeals allowed; specific-performance decree set aside; appellants to pay Rs20 lakh within three months, with 8 per cent annual interest after that period if unpaid; respective costs borne.