Padmakumari & Ors. v. Dasayyan & Ors.
Background
The original owners (defendant Nos. 1 to 11) entered into an unregistered agreement to sell land to the plaintiff for Rs. 65,000, with the balance consideration payable within nine months, but the plaintiff admittedly failed to pay the remaining amount by the due date. The owners then entered into a fresh agreement with a different set of buyers (defendant Nos. 12 to 15: later the appellants), who paid substantial consideration and ultimately obtained a registered sale deed for the property. The original plaintiff sued for specific performance and/or a declaration regarding the property, and both the trial court and the Madras High Court ruled in the plaintiff's favour, prompting defendant Nos. 12 to 15 to appeal to the Supreme Court.
Decision Breakdown
The Supreme Court held that defendant Nos. 12 to 15 had proved, through the evidence on record (including their own agreement and the registered sale deed, Exhibit B-3), that they purchased the property for valuable consideration, in good faith, and without notice of the plaintiff's earlier unregistered agreement, making them bona fide purchasers entitled to the protection of Section 19(b) of the Specific Relief Act, against whom specific performance of the plaintiff's earlier contract could not be enforced. It found that both the trial court and the High Court had overlooked this crucial evidence and pleadings, rendering their concurrent findings erroneous in law. The Court accordingly allowed the appeal, set aside the judgments and decrees of both lower courts, and dismissed the plaintiff's suit, with no order as to costs.
Lesson Learnt
A buyer who pays full value for property in good faith and without knowledge of an earlier, unperformed sale agreement is legally protected as a bona fide purchaser: a seller's earlier, unfulfilled promise to sell (especially where the first buyer failed to pay on time) cannot automatically be enforced against such a later, genuine purchaser.