Property Law

Guruswamy Nadar v. P. Lakshmi Ammal

(2008) 5 SCC 796

Facts

The original owner agreed on 4 July 1974 to sell a house to Lakshmi Ammal for ₹30,000.
An advance of ₹5,000 was paid.
When the owner failed to complete the transaction, Lakshmi Ammal filed a suit for specific performance on 3 May 1975.
Two days after the suit was instituted, the owner executed a registered sale deed in favour of Guruswamy Nadar for ₹45,000.
Guruswamy claimed that:
he paid full consideration;
he received possession; and
he had no notice of the earlier agreement or suit.
The courts accepted that he was a bona fide purchaser without actual notice.
The question was whether his purchase nevertheless remained subject to the pending suit.

Lis pendens is based on public policy and not upon notice.
Once a suit directly affecting rights in immovable property is pending, a transfer by a party remains subject to its result.
Good faith, consideration and absence of knowledge do not by themselves displace Section 52.
A pendente lite purchaser is bound by a decree for specific performance against the vendor.

The suit for specific performance commenced on 3 May 1975.
Guruswamy’s sale deed was executed on 5 May 1975.
The property and rights claimed in both transactions were the same.
Therefore, every requirement of lis pendens was satisfied.
Guruswamy’s status as a bona fide purchaser was relevant under ordinary principles governing subsequent purchasers.
However, Section 52 created a separate and overriding rule:
the vendor could not, after the suit was filed, transfer the property so as to defeat the plaintiff’s possible decree.
The doctrine did not make Guruswamy’s sale deed nonexistent.
It made his title subordinate to the outcome of the specific-performance suit.
Since the earlier agreement-holder obtained a decree, Guruswamy was bound by it.

The subsequent sale was affected by lis pendens.
Guruswamy could not claim priority merely because he acted in good faith without notice.
The decree for specific performance in favour of Lakshmi Ammal was upheld.
Guruswamy’s appeal was dismissed.