Summary
The Supreme Court upheld the High Court's decree for specific performance against subsequent purchasers. Under Section 19(b) of the Specific Relief Act, a subsequent purchaser who claims to be a bona fide transferee for value without notice bears the burden of proving it. Good faith needs both honesty and due care, and a purchaser who makes no inquiry of a person in actual possession is fixed with constructive notice.
Issues
- Whether the subsequent purchasers (appellants) were bona fide transferees for value who had paid in good faith without notice of the prior agreement, so as to be protected under Section 19(b) of the Specific Relief Act, 1963.
- On whom the burden lies to prove good faith under Section 19(b), and what 'good faith' requires.
Provisions considered
- Section 19(b), Specific Relief Act, 1963Read as an exception to the general rule that specific performance can be enforced against persons claiming under the vendor by a later title; the onus is on the subsequent purchaser to prove that he bought for value in good faith without notice. The appellants were held not to have discharged it. (¶¶ 9, 10, 11, 12, 20)
- Section 3, Explanation II (definition of 'notice'), Transfer of Property Act, 1882Relying on R.K. Mohammed Ubaidullah and Ram Niwas v. Bano, the Court noted that actual possession of a person is constructive notice of his title, so a subsequent purchaser must inquire into the nature of that possession; abstaining from inquiry attracts deemed notice. (¶¶ 11, 16, 19)
- Section 3(22) (definition of 'good faith'), General Clauses Act, 1897Read with the penal-law definition of good faith; the General Clauses Act definition stresses honesty, which the Court treated as complementary to the requirement of due care. (¶¶ 13, 15, 18)
- Section 2(11) BNS (Section 52 IPC) (definition of 'good faith'), Bharatiya Nyaya Sanhita, 2023 / Indian Penal Code, 1860The penal definition, which denies good faith to acts done without due care and attention, was read together with the General Clauses Act definition to hold that good faith requires both due care and absence of dishonesty. (¶¶ 14, 15)
Held
- Section 19(b) of the Specific Relief Act protects a transferee for value who paid in good faith without notice of the original contract, but as an exception to the general rule it places the onus on the subsequent purchaser to prove that he purchased in good faith and for value. (¶¶ 11, 12)
- Good faith requires that the act be done with due care and attention and without negligence or dishonesty; the penal-law definition (due care and attention) and the General Clauses Act definition (honesty) complement rather than exclude each other. (¶¶ 13, 14, 15)
- A subsequent purchaser who relies on the vendor's word and does not inquire into the nature of the possession of a person in actual possession cannot escape the deemed notice under Explanation II to Section 3 of the Transfer of Property Act; acting despite suspicion without further inquiry is not acting honestly. (¶¶ 11, 16, 17, 18, 19)
- The High Court committed no error of law in holding that the appellants were not bona fide purchasers, on findings that included the first appellant being the vendor's nephew, the plaintiff's husband being mortgagee in possession of whom no inquiry was made, and the absence of proof of the source of the consideration said to have been paid. (¶¶ 10, 20)
Result
Appeal dismissed; the plaintiff left free to execute the decree for specific performance; pending applications disposed of.