Chander Bhan (D) Through LR Sher Singh vs Mukhtiar Singh & Ors.
Background
In 2002, the appellant entered into an agreement to sell 16 "Kanals" of land with respondent no. 3 for Rs. 8 lakh, paying Rs. 2.50 lakh as earnest money upfront, with the balance due at the time of execution of the sale deed. When the deal did not go through as agreed, the appellant sued for specific performance. While the trial court and first appellate court ruled in the appellant's favour, the Punjab and Haryana High Court reversed those findings in second appeal, dismissing the specific-performance claim (though it did order return of the earnest money with interest). During the litigation, an injunction was in place, yet the land was later sold to respondents 1-2 by respondent no. 4.
Decision Breakdown
The Supreme Court restored the concurrent findings of the trial court and first appellate court, holding that the sale deed executed in favour of respondents 1-2 during the pendency of the injunction was void of legal effect. Applying the doctrine of "lis pendens" (that a property transfer made while litigation is ongoing cannot defeat the rights of the party who wins that litigation), the Court held respondents 1-2 could not claim protection as bona fide purchasers for value. It set aside the High Court's judgment, upheld the decree of specific performance, and directed respondent no. 3 to accept the balance sale consideration of Rs. 5,50,000 and execute the sale deed in the appellant's favour within three months.
Lesson Learnt
Once a court case over a property is pending and an injunction is in place, any sale of that property to a third party during the litigation does not bind the person who ultimately wins the case: buyers must always check for pending litigation before purchasing property.