National University of Juridical Sciences Property

Introduction

The Transfer of Property Act [hereinafter ‘TOPA’] is a legislation that filled the lacuna in the set up of Indian Laws. This lacuna was a combined result of the fact that earlier, with a predominant panchayati system, custom was the main tool of effectuating transfers. However, a little before Independence, this trend had changed to English Law which governed the field of transfer of property. While it was a welcome change as it brought a standard rule across the country, it was a flawed concept as the English idea of justice could not be applied strictly to the socio-economic potpourri of Indian conditions. [1] What followed was a slightly adapted form of the same rules by modifying it using judicially-created notions of equity justice and good conscience. There were certain instances when this discretion would go contrary to the precedent set by the application of English Law and thus, create further confusion.

It would be acceptable to state thus, that there would have been a fundamental requirement of a domestic legislation which could create a compendium of the applicable English Law on the matter in India along with these judicially created notions of equity justice. With the advent of TOPA, one such principle of lis pendens was introduced which acted as a regulator on the transfers effectuated. The concept of lis pendens is a common law concept which pertains to the parties to a litigation, the subject matter of which is property. It aims to prevent the alienation of the said property when the litigation concerning the same is pending before the court. [2]

This project will delineate the meaning, purpose and implementation of the concept of lis pendens and its application in the TOPA and other legislations like the Code of Civil Procedure. The researcher will analyze the scope of Section 52 of the TOPA and its application in Property Law. Finally, the project will look into the pertinent judgments on the said doctrine and attempt to formulate a model of how the application of lis pendens has changed over the years and the ultimate end it has served.

Chapter I: Analysis of Section 52, Topa

The question of lis pendens is dealt with substantially in Section 52 of the Transfer of Property Act. Section 52 states:

“During the pendency in any Court having authority […] of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto 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. [3] ”

Meaning

From a plain reading of Section 52, it is clear that the underlying aim of the same is to protect the sanctity of court proceedings, the subject matter of which is immovable property. To elaborate, there will be instances when two parties will go to court with a dispute at the centre of which lies immovable property. Once, they approach the court, the property in question is assigned a special status. This is so as the determination of the court ultimately decides the rights of the parties over the property. With this material determination at stake, it would be extremely prejudicial to the rights of any party, if the other transferred the property in question, before the court arrives at an outcome in the pending litigation. Such an act would defeat the entire purpose of the litigation process and would render the determination of the court null and void. The ramification of such an act even amounts to subverting the jurisdiction of the court as the party’s action of transferring the property before his right to do so, has been confirmed by the court amounts to contempt of the court proceedings. [4]

Court

The provision places a special emphasis on the fact that the litigation in question must be pending in “a court having authority.” There are various implications of this phrase.

Firstly, it precludes any jurisdiction that could be afforded to a tribunal. Tribunals that look into the disputes concerning immovable disputes do not have the same power as courts. This is due to their inherent functional disabilities. It is established that a Tribunal is merely a body with all the trappings of a court, but is not a court itself. [5]

Secondly, the emphasis on court is a sign of intent by the legislature that the implementation of the word ‘court’ is for achieving the ends of the provision. If the purpose of the provision is to prevent a party from alienating a property which is the subject matter of the dispute, pending litigation in a court, it is necessary that the court in question must be the appropriate forum to adjudicate upon the dispute. In other words, it should have sufficient authority to deal with the issue and make a final determination of the rights of the parties over the property.

Finally, the requirement of having a court which can deal with the matter conclusively is that it will help affix the rights of the parties pertaining to the property in question.

This is essential as the court’s determination of who hold the rights over the property will ultimately affect the right of the transferee who might have received the property pending the disposal of the dispute.

Directly and Specifically in question

The provisions of TOPA mandate that in order to effectuate the utilisation of Section 52, it is necessary that the matter pending before the court pertains substantially and directly to immovable property. [6] This means that if one party to a suit transacts with a third party regarding property X, for the application of Section 52 and to bar this transaction, it is necessary that the subject matter of the original suit is property X.

This statement implies two things: firstly, the property which is the subject matter of the suit must be similar to the one which is transacted upon by a party to the suit with a third party. Secondly, it is mandatory that the subject matter of the dispute in court must be property. In other words, this property must form the crux of the dispute in court. [7]

Suit or Proceedings

Section 52 has been careful to include a wise use of terminology regarding the status of the litigation before the courts. This ensures maximum protection of the parties to the suit to such that their rights over the property are not infringed by an unauthorised alienation.

In this provision, the court had carefully tied up the use of the words “suit or proceedings” with “thereto under any decree or order.” This is so as the decree is passed by the court while the order is connected to the proceedings carried on in court. The suit is instituted in court on the basis of presentation of plaint while the proceedings occur on the basis of an application.

In order to ensure that the rights of the parties to the litigation are not infringed, the provision mandates that the suit or proceeding in question be contentious in nature. [8] It tries to prevent collusion between a party to the suit and a third party in order to prevent another to alienate the property. [9] The idea is to disallow alienation of property which is a subject matter of the suit if and only if, the suit in question is not a product of collusion between parties to prevent another from alienating the property.

Question of Pendency

Section 52 provides that alienation of property is impossible when the same is part of a suit between two parties. The statute provides that this bar will apply for the period when the suit is pending before the court. [10] In other words, till the time the litigation persists in court, it is impossible for the parties to alienate the property which is the subject matter of the dispute. This is so as any alienation of the property will be subject to the decision that the court arrives at.

Prior to 1929, it was disputed as to what was meant by the phrase ‘pendency of suit’ and how this rule would bar any alienation. After the passing of the amendment in 1929 however, this position was clarified. The Explanation to Section 52 provides that the word ‘pendency’ refers to the period starting from when the suit or proceeding is instituted in court till the time of the final disposal of the suit or proceedings. It provides that final disposal of the matter will be regarded on the passing of a decree or order. The suit would no longer be pending however, when the passing of decree or suit is impossible in case of the period of limitation for seeking remedy expiring. [11]

Simply put, a case will be said to be pending in court from the moment of its institution till the point of its final disposal by the court. The Explanation qualifies this statement in many ways.

Firstly, the matter before the court can be initiated by way of presentation of plaint in case of a suit as well by institution of proceedings. Thus, a fresh suit can be initiated or an application can be presented for initiating proceedings. [12]

Secondly, the matter must be initiated in a court that must be competent to hear it and pass a decision on it. This is particularly important as the crux of the provision deals with affecting the rights of the parties to the suit. These rights can only be affected by a court which is competent to adjudicate upon the dispute between them. Only when the competent court looks into matter, will the case be said to be pending. During this stage of pendency, alienation will be impossible. [13]

Finally, there must be no more scope left in the decision-making of the case. In other words, either case must be dealt with by a final decree or order or the chance of getting remedy is nullified owing to the period of limitation expiring. In both these cases, the litigation will come to an end. Thus, in such a case, the matter cannot be said to be pending and alienation will be allowed. [14]

Chapter II: Lis Pendens

The doctrine of lis pendens gets its origins from the latin maxim ‘Pendente lite nihil innovetur’ which implies during the pendency of the suit, nothing new must be introduced. [15] The concept of lis pendens has been enshrined in Section 52. This doctrine provides for the protection of the rights of the parties to litigation. It states that during the pendency of a suit, the parties cannot alienate the property which is the crux of the dispute so as to prevent them from causing harm to each other. [16]

Lis Pendens is the power a court enjoys over the property which is the subject matter of the dispute. The exposition of this doctrine indicates that the requirement for this concept arises from the very nature of the control exercised by the court over the property which is the subject matter of the dispute. This is the power of preventing the alienation of the same property till the time the dispute is settled finally by the court. This doctrine literally means pending suit and amounts to the jurisdiction, power and control that the court exercises in order to prevent alienation of the property, the rights over which are hitherto undecided. [17]

The purpose behind the implementation of this concept is that the rights of the parties to the litigation must be protected from infringement. This is done by assigning a special status to the property which is the subject matter of the dispute. When the parties have come before the court to let it decide about their rights over a certain property, it is necessary that no party is allowed the benefit of alienating the said property. Allowing this power to a party would subvert the jurisdiction of the court. [18] This power would be an affront to the decision of the court hearing the dispute. It would lead to the frustration of the decree of the court.

This is so as the duty of the court is to adjudicate upon the rights of the parties regarding the property in question. If one of the parties can alienate the same property, it would nullify the point of the entire litigation and put the other party at a disadvantage as he is left remediless. To prevent this unfair eventuality, the concept of lis pendens acts as a check on the power of alienation of property to prevent infringement of the rights of the parties. By doing so, the subject matter of the dispute does not become a nullity and infructuous.

Various decisions have held that the concept not only prevents transfer of rights over the property but is wide enough to include all dealings with the property to affect the rights of the party thereto. Thus, this doctrine has a wide ambit in its application. [19]

The effect of this doctrine is that if the concerned property is alienated to a third party, that party will be affected by the decree passed by the court. This is an anomaly considering the fact that the third party has not even been impleaded in the matter. [20] The property over which the rights of the parties to the litigation were to be decided now vests with the alienee. Owing to this, his right over the property is subject to the order or decree of the court. By doing so, the object of the original suit is not defeated. [21]

The effect of lis pendens arises from the fact that rights cannot be given to an assignee of the alienator over the original holder of the property. The law protects the right of the parties to not have their rights over the property in question vitiated owing to the act of one party. It also protects the rights of the original holder against the demands of the alienee. The alienee is made bound to the decision of the court as well and cannot override the interests of the holder of the property. [22]

Scope of lis pendens

The scope of lis pendens even though wide, does not actually bar transfers effectuated by the parties during the pendency of the suit. It merely keeps all transfers on hold and its validity is dependent on the outcome of the pending suit. This means that the alienee who is the beneficiary of the transfer will be affected by the order of the court and will be bound by it. [23]

In other words, this section aims to maintain status quo ante until the final determination is made by the court. Only after this pendency comes to an end after the passing of the decree or order will the rights of the parties to the suit and if the case demands, of the alienee be decided conclusively.

Chapter III: Application in Judgments

Section 52 and the concept of lis pendens have been delineated above. The doctrine, as I have already shown, has a wide scope of application. The courts in India have applied this doctrine to a string of different cases and refused to apply it in others.

However, the application of the section has been restricted by applying the caveat that the subject matter of the pending litigation must be the property in question. Lis pendens does not apply to those suits in which the right over the immovable property is not in question. Examples of such cases include suit for damages limited to a money demand [24] or suit for rent of an agricultural holding. [25]

In a matrimonial case, the wife sued her husband for maintenance. In this case, the husband alienated the property and the wife claimed that this transfer was barred owing to the application of the doctrine of lis pendens. This was rejected by the court as the property in question was not the direct subject matter of the suit. [26] However, in another case for maintenance, the court created a charge on the property in order to effectuate the payment of maintenance. In this case, the court held that lis pendens would apply and the transfer would be subject to the decree of the court. [27]

The rule of lis pendens is applicable in the suits for specific performance as well. A suit may have been transferred to a transferee without informing him that the property is tied to an earlier contract, elsewhere. However, his payment of consideration in good faith will not override the application of lis pendens and the transfer will eventually be subject to the decision of the court regarding specific performance. [28] The doctrine will still apply as it is based on public policy. [29]

Lis Pendens applies in cases of mortgage as well. However, in a suit of mortgage where only a money decree is given, this concept has no application. This is because the direct subject matter of the suit is not the property in question. [30]

In a partition suit, clearly the subject matter of the dispute is property. In such a case, the purchaser of the property will be bound by the decision of the court and will get a share out of the part allotted to the seller by the court. [31] This rule was upheld even in the case when a suit for partition was instituted by a family member and the property was given away by the karta. Here too, lis pendens was upheld. [32]

This doctrine applies to the suits pertaining to pre-emption. This is so as the subject matter of a suit for pre-emption is the property in question. This view was upheld in a case where the property in question could not be transferred once the suit for pre-emption had been instituted until it had been finally declared. This was so as otherwise, alienation would interfere with the plaintiff’s rights who had filed a suit for pre-emption. [33]

Further, suits filed in order to claim rent do not attract application of lis pendens as it is assumed that the same do not constitute a charge on the property in question. Hence, in suits for rent, the property is not the subject matter of the dispute. Thus, transfer of the property would not attract the application of lis pendens. [34]

Finally, the doctrine of lis pendens applies even to the involuntary transfers of property such as those, ordered by court. A suit for maintenance creating a charge on property will affect the rights of the decree-holder in a money suit even though he has no links to the former suit. He will be bound by the decree of the court ordering a court sale and the doctrine of lis pendens has application here. [35]

Conclusion

The concept of lis pendens is enshrined within Section 52 of the TOPA. It is a public policy concept which aims to safeguard the rights of the parties to the suit by ensuring that the rights over the property in question is not alienated during the pendency of the suit. This ensures that while the matter is pending in court, the property is assigned a special status. Thus, with this protection, the suit is prevented from being infructuous by an alienation of the property. Not applying lis pendens would amount to making the decision of the court a nullity.

Section 52 has been discussed in detail in this project. I have delineated how the concept of lis pendens applies provided the suit is initiated in a court of competent jurisdiction. Here, the court must pass an order or decree concluding the matter at hand where the subject matter of the dispute is the property in question. The court must be competent as it must decide upon the rights of the parties to the suit.

Finally, this project has gone into numerous case laws to discuss the scope of the application of the doctrine of lis pendens. Courts, over the decades have decided upon the application of this doctrine differently, depending upon the type of case in discussion. It has a sufficiently wide scope and applies even to suits involving court sales or involuntary sales. Thus, it covers within its ambit, not only voluntary transfers but involuntary transfers as well. The Delhi High Court has gone ahead to state that even in cases where the TOPA does not apply, its underlying principle of lis pendens will still apply.

The concept of lis pendens as enshrined in Section 52 is thus, a welcome concept and one which will go a long way to protect the rights of the parties over the property which is the subject matter of the dispute between them. It achieves this objective along with ensuring that that the parties to the suit as well the third party to whom the suit has been alienated respects the decree or order of the court. Thus, the transfer of property during the pendency of the suit is not barred. However, the transfer will be subject to the finding of the court. This ensures that justice is not only done but appears to be done.