Doctrine of Lis Pendens and the Cycle of Prolonged Litigation

The Author, Shikhar Verma, is a final year LLB student at Jindal Global Law School in Sonipat, Haryana. Formerly, a student of Nottingham University Business School, University of Nottingham, United Kingdom

Introduction:

The Doctrine of Lis Pendens translates to a ‘pending legal action’ in a Court of law. This principle has been embodied in the form of Section 52 in the Transfer of Property Act[1] (the ‘Act’ from hereinafter), 1882. Even if it was not personified in the form of the aforementioned provision, it would still have been applicable by the virtue of being an established principle based on justice, equity and good conscience[2]. This doctrine restricts either of the parties to a suit, to sell or otherwise transfer an immovable property which is the subject matter of a dispute between such parties. The Principle is based on the legal maxim Ut lite pendente nail innovateur, meaning that ‘nothing new should be introduced in an already pending litigation’.

Development of the Principle:

There are two theories that explain the evolution of the Doctrine of Lis Pendens, the ‘Theory of Notice’ and the ‘Theory of Necessity’. But, the theory on which the doctrine was actually established has always been unclear. Previously, it was claimed that the principle was developed on the ‘Theory of Notice’[3]. This theory states that a pending suit must serve as a constructive notice to the world that the title of the property is in dispute. It deliveres a warning to third parties against buying the suit property until such a time when its title is settled.

On the other hand, it was also claimed that the principle was evolved out of necessity as a matter of public policy. This view emerged because prior to the formulation of this rule, either of the parties would alienate the suit property to a third party with a mala-fide intent. Such pendente lite transfer, would ultimately hamper the rightful claim of a genuine party. Lord Cranworth in the case of Bellamy vs. Sabine[4] (1857) called it incorrect to assume that the principle was based on the ‘Theory of Notice’ even though the language of the Courts would suggest so. He affirmed that the rule was based on the ‘Theory of Necessity’ so that the party alienating a suit property would not be able to prevent the final decree of the Court from benefitting the genuine party.

Requirements for the Applicability of the Relevant Sections:

Section 52 of the ‘Act’ enshrines the Doctrine of Lis Pendens and provides certain requirements that need to be fulfilled in order to successfully apply the rule. The same have been reaffirmed by the Supreme Court of India in the case of Dev Raj Dogra and Ors. vs Gyan Chand Jain and Ors.[5] (1981). The Section requires:

1. The pendency of a suit, the direct subject matter of which is any kind of right over an immovable property.
2. That the suit must be pending in a Court that has appropriate jurisdiction to try the case.
3. That there should be no collusion between the parties to the suit.
4. That the transfer of such a suit property by either of the parties is prohibited during its pendency unless expressly allowed by the Court.

Order XXII Rule 10 of the Civil Procedure Code[6] (hereinafter the ‘Code’) (1907):

1. Requires the occurring of the assignment/ creation/ devolution of any interest in a property during the pendency of the suit.
2. And that the suit may be continued by or against the individual in favour of whom the interest has devolved.
3. And that the applicability of this Rule is subject to the discretion of the Court.

Lastly, Order 1 Rule 10(2) of the Code allows the Court:

1. To include or exclude parties to a suit with or without an application by either party.
2. And such party may be included only if the Court deems the presence of the party necessary to render judgment on the case effectively.
3. And the inclusion of any party will be subject to the terms that the Court may think to be just.

Status Quo:

The general standpoint emerging from the cases holds the interests of the transferee pendente lite to be subservient to the interests of the original parties to the litigation. Therefore, such transfers are not void, but are held to be voidable at the option of the party in whose favour the Court has decreed. It was stated in the case of Gouri Dutt Maharaj[7] that Section 52 ensures that the status quo of the parties to the suit is maintained notwithstanding such transfers. In cases where either of the parties successfully manage to alienate a suit property, the Transferee pendent lite is the one whose interest may be handicapped as an outcome to the Court’s decree. Such decree is by and large in the favour of one of the parties of the original suit. This paper aims to explore the rights and options that such transferee’s have and the remedies available to them.

Rights of Transferee Pendent Lite:

There is a plethora of Indian cases which explore the judicial interpretation of Section 52 of ‘The Act’ and the rights of different parties that are affected by pendent lite transfers. Earlier Supreme Court cases like Sarvinder Singh vs. Dalip Singh[8] (1996) interpreted the aforementioned Section to hold the transfers of all suit properties to be void or illegal. However, this was a wrong interpretation of the Section, as has been evidenced in earlier case laws. The position of the Court was overturned in cases that will be discussed in the subsequent portions.

The case of T.G. Ashok Kumar vs. Govindammal and Anr.[9] (2010) clarifies the position of the Courts regarding this problem of pendente lite transfers. Here, the Supreme Court of India reaffirmed that a property whose title is the direct subject matter of a litigation cannot be transferred pendent lite. Such transfers would restrict the rights of the party in whose favour the Court would have ultimately decided as to the vesting of the title of the property. Where, as a result of the Court’s decree, the right of the pendent lite transferor to the property is upheld, then the transferee’s title to the property will be unhinged. However, where the pendent lite transferor’s title is recognised only regarding a smaller part of the property, transferee will have a title only to the extent of that portion of the property. The transfer of the title of the rest of the property, over which the pendent lite transferor has no right will be invalid. This means that the transferee will not be able to claim the title or any other interest in the remaining part of the property. Lastly, if it is found that the transferor did not have any right to the transferred property in the first place, then such transferee will not have acquired any right in the property either.

This case[10] also talks about the right of the transferee where the co-owner of the property, alienates it fully or only a part of it, while representing himself to be its absolute owner. In such circumstances the Court will try to adjust equities. It will make sure that no loss is caused to the other concerned parties. Efforts will be made to allot the property to the transferor, so that the bona fide rights and titles of the transferee pendente lite are saved fully or partially.

In the case of Vinod Seth vs. Devinder Bajaj (2010)[11], the Court allowed the Defendent to make a pendente lite transfer while asserting its power to exempt the suit property from the limitations mentioned under section 52 of the Act. However, such exemptions from Section 52 are subject to the impositions of certain conditions that the Court may deem to be appropriate. In the present case, Appellant was a builder who wanted to earn a profit through the construction of a building over the suit land, whereas the Defendent wanted to transfer it to a third party. The amount of estimated profit that the Appellant could have earned i.e. a sum of 3 lakh rupees, was to be deposited as a security by the Defendent so as to freely transfer the suit property. Payment of this amount was the condition imposed by the Court, fulfilling which would make the transfer pendente lite valid.

In Amit Kumar Shaw vs Farida Khatoon (2005)[12], the main issue revolved around the impleadment of the transferee within the original suit which would have vested the title of the property in one of the parties. The Supreme Court read Order I Rule 10(2) and Order XXII Rule 10 of the Code of Civil Procedure, 1907 along with Section 52 of the Transfer of Property, 1887 Act to include transferee pendent lite as a party to the suit. The transferor had no interest in the pending litigation subsequent to alienating the suit property. Instead of being included as a new party to the already existing suit, the Appellant i.e. the transferee had asked the Court to substitute him in the transferor’s stead. The Court regarded the presence of the transferee pendent lite as being “absolutely necessary” to effectively judge the issues between the parties. It was stated that post the alienation of the suit property, the interest of the transferee had become substantial and was not a mere subsidiary interest. Also, under Order XXII Rule 10, an alienee pendent lite could be inculcated as a party to the litigation. However, such an inclusion of the transferee pendente lite is subject to the discretion of the Court. If the Court allows for such a replacement the alienee becomes the “representative-in-interest” of the original party, from whom he had acquired that interest. Thus, allowing for the impleadment of the transferee as an interested party into the suit.

A similar view has been taken by the Madras High Court in V.L. Dhandapani vs. Revathy Ramachandran[13] (2014), where the transferee had applied to be inculcated as the second Plaintiff under Order I Rule 10(2) of the Code. He claimed to be the bona fide purchaser of the property in question, a contention that was rejected in the earlier appeals, but was allowed by the High Court. The District Munsif had earlier rejected his application based on the reasoning that the transferee was required to establish a fresh suit rather than continuing the old one. The Respondent had claimed ignorance to the knowledge of the pendency of the original suit at the time of the purchase as a justification for making such mistake. It was reaffirmed by the Court that the Doctrine of Les Pendens as embodied in Section 52 of the Act did not annul the conveyance of a suit property altogether. The scope of Order I Rule 10(2) of the Code allows for the transferee pendent lite to be included as a party to the suit, but would disqualify the transferor from contesting the suit any longer. It would replace the transferee with the transferor in the pending suit for deciding the title over the property as the transferee’s interest, in the pending suit, was a valid one. As a result, the Appellant was inculcated as a Defendant to the original suit and was held to have all those defences that were available to the original Defendants. Whether a transferee will be impleaded as a party or not depends on the facts and circumstances of each case and there is no particular test to qualify them for the same.

All the cases dealt with previously have showcased the result in cases where either of the parties to the original suit would alienate the suit property to hinder the other party’s rights. However, the outcome of a circumstance where the both the transferor and the transferee collude with each other following a transfer pendente lite is traversed in the case of Shantilata Masanta vs. Rajinimani Nayak (2007)[14], where the transferor, had sold his property to the transferee and the aggrieved party in the original suit had claimed the transaction to be illegal by virtue of Section 52. However, during the pendency of this petition, the transferor lost his interest in contesting the suit altogether, hampering the rights of the transferee as well. The Court stated that if it would appear that a transferor is not properly defending the suit and is conniving with the Plaintiff or any other party to the suit then the transferee will be allowed to join the original suit as a Defendant by virtue of Order XXII Rule 10 of the Code. It was stated that the proposition of the law under Section 52 disqualifying the transferee from contesting the suit is not an absolute bar. The transferee was held to be a representative-in-interest of transferor.

Relief of Specific Performance of an obligation of Transferee Pendent Lite

Where an original purchaser i.e. a person who enters into an ‘Agreement to Sell’ with the Defendant and files a petition for the specific performance of the Agreement and sells such property to a third party. Such third party would be able to inculcate itself as a party in the suit and would take the place of the Defendant. It was held in Raghunath Fulaje Jadhav vs Rajendra Dinkarrao Patel (2007)[15], that if the Court decrees for specific performance of such an Agreement to Sell, then the new transferee would be bound by it no matter the huge amount of money that he had spent to purchase it. Here, the transferee knew about the previous Agreement and the pendency of the suit. Even then the transferee will be replaced as a successor of the transferor as a party to the suit, due to Order I Rule 10(2) of the Code.

Impleadment of Transferee from the Plaintiff’s side:

It was held in V Rama Rao vs. T Ranganathan[16] (2008), that those transferees to whom the suit property has been transferred by the original Plaintiffs of a litigation stand on a different footing than, had the property been transferred by the original Defendents. In the latter cases, when the Defendent transfers the property to a transferee, the latter can be impleaded or be given damages, only subject to the Court’s discretion. However, in case of a transferee acquiring property from the Plaintiff, the transferee will become a party to the suit almost as a semblance of right.

In my understanding, the Plaintiff to a suit is the aggrieved party who has been wronged by the Respondent. So, if the Respondent, who is already suspected of a wrong, transfers the property to further deprive the Plaintiff of his possible right, then the bona fide intent of his transferee can also be questioned. Whereas, if the person who has filed a petition claiming a wrong to be done against him, then he is allowed lee way to alienate the property. Otherwise, as a consequence of the Respondent’s actions, the Plaintiff will be deprived of his Right to sell the property during the pendency of the suit which may exceed for years at end.

Analysis and Conclusion:

The problems relating to Property Law in India are sundry. Most of these disputes go on for years, crossing the lifetimes of the parties and inherited by their successors. A Lis Pendens proceeding protects the rights of an innocent party, but in case of third-party transfers during the pendency of the original suit, this Doctrine also prolongs the already protracted process. It wastes a lot of time, money and the sanity of all the parties. Therefore, mechanisms need to be set in place to make sure that a suit property is not transferred at least by the Respondents during the pendency of such original suits. Government should take steps like creating a computer database or a registry that can be linked to the Aadhar cards of the parties. This would intimate the concerned authority registering the Sale Deeds as to any pending litigations that the party may have. This can also allow the display of a list of the assets that parties own and the litigations related to those assets. Such steps will keep the Government and the Courts from allowing the transfer of any such property in the first place. Courts in India only have a finite mount of resources and time which must be preserved as much as possible. Such litigation also hinders with the enjoyment of the property throughout the lifetimes of the original owners and should be avoided.

The interpretation of the doctrine as well as of Section 52, by the Supreme Court has been varied across cases. Even though the established elucidation provides a lot of flexibility in regards to the right of all the parties, but every now and again a judgement is rendered, which makes the applicability of the doctrine rigid. The latter usually provides for holding transfers pendente lite as void-ab-initio and illegal. However, the latest interpretation in Madhukar Nivrutti Jagtap[17] (2019) holds the rights of the transferee to be subservient to that of the other parties to the suit and it quashed the finding of the Sarvinder Singh (Supra) Case. Every now and again the Sarvinder Singh case is upheld and subsequently quashed by the Supreme Court. However, such lack of uniformity and unpredictable nature in the interpretation of the Statute, by the Apex Court that can occasionally make such transfers illegal. This prevents the solution to the issue of prolonged litigation and also creates injustices. Therefore, a concrete solution such as the one mentioned above has to be arrived at, by way of a statute or a decree, so that the issues cropping in the above cases can be solved. Till such a solution is arrived at, the wider interpretation of the Statute is ideal, so that the transferee in transfers pendente lite are not disadvantaged altogether. These cases still provide them to either be inculcated in the original proceedings or be replaced with the transferring party. This reduces the scope of injustice being done and gives the transferees a chance to bring forth their concerns and represent their interest.

References: