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Doctrine Of Lis Pendens :: A Critical Evaluation

INTRODUCTION

The broad principle underlying S. 52 of the Transfer of Property  Act is to maintain the status quo unaffected by the act of any party to the litigation pending its determination-even after the dismissal of a suit, a purchaser is subject to lis pendens, if an appeal is afterwards filed-if after the dismissal of a suit and before an appeal is presented, the ‘lis’ continues so as to prevent the defendant from transferring the property to the prejudice of the plaintiff-no reason to hold that between the date of dismissal of the suit plainly be impossible that any action or suit could be brought to a successful termination if alienations pendent lite were permitted to prevail-The doctrine of lis-pendens is founded in public policy and equity and if it has to be read meaningfully such a sale until the period of limitation for second appeal is over will have to be held as covered under S. 52 of the TP Act.[1]

The principle of the maxim pendente lite nihil innovetur is incorporated in this section. The section provides that during the pendency of any suit in which right to immovable property is in question, neither party to the litigation can transfer or otherwise deal with such property so as to affect the rights of the opponent. The Explanation makes it clear that lis shall be deemed to commence from the date of the presentation of the plaint and to continue until the suit or proceeding has been disposed of by a final decree or order, and complete satisfaction or discharge of such decree or order has been obtained.[2]

In Jayaram Mudaliar v. Ayyaswami[3] Supreme court held that the purpose of Section 52 of the Act is not to defeat any just and equitable claim, but only to subject them to the authority of the court which is dealing with the property to which claims are put forward. This court in Hardev Singh v. Gurmail Singh[4] Section 52 of the Act does not declare a pendente lite transfer by a party to the suit as void or illegal, but only makes the pendente lite purchaser bound by the decision in the pending litigation. The principle underlying Section 52 is clear. If during the pendency of any suit in a court of competent jurisdiction which is not collusive, in which any right of an immovable property is directly and specifically in question, such property cannot be transferred by any party to the suit so as to affect the rights of any other party to the suit under any decree that may be made in such suit. If ultimately the title of the pendente lite transferor is upheld in regard to the transferred property, the transferee’s title will not be affected. On the other hand, if the title of the pendente lite transferor is recognized or accepted only in regard to a part of the transferred property, then the transferee’s title will be saved only in regard to that extent and the transfer in regard to the remaining portion of the transferred property to which the transferor is found not entitled, will be invalid and the transferee will not get any right, title or interest in that portion. If the property transferred pendente lite, is allotted in entirely to some other party or parties or if the transferor is held to have no right or title in that property, the transferee will not have any title to the property.

Object of the Doctrine

The object of S. 52 is to subordinate all derivative interests or all interests derived from parties to a suit by way of transfer of pendente lite to the rights declared by the decree in the suit and to declare that they shall not be capable of being enforced against the rights acquired by the decree-holder. A transferee in such circumstances therefore takes the consequence of the decree which party who made the transfer to him would take as the party to the suit. The principle of lis pendens embodied in Section 52 being a principle of Public Policy, no question of good faith or bona fide arises. Such being the position, the transferee from one of the parties to the suit cannot assert or claim any title or interest adverse to any of the rights and set interests acquired by another party under the decree in suit, the principle of lis pendens prevents anything done by the transferee from operating adversely to the interest declared by the decree.[5]

Lis Pendens

‘Lis’ means an action or a suit. ‘Pendens’ is the present principle of Pendo, meaning continuing or pending, and the doctrine of lis pendens may be defined as the jurisdiction, power, or control that courts have, during the pendency of an action over the property involved therein.[6]

Basis of the Doctrine

The section incorporates the well-known doctrine of lis pendens which, to quote Turner, L.J.,[7] rests on the foundation. “That it would plainly be impossible that any action or suit could be brought to a successful termination, if alienations, pendente lite were permitted to prevail.”The doctrine of restitution which the section incorporates is based on the principle that the acts of the courts should not be allowed to work injury on the suitors.[8]  The principle contained in this section is based on the English common law maxim ut lite pendente nihil innovator i.e. during litigation no new rights should be introduced.[9] It prohibits alienation of property when a dispute relating to the same is pending in a court of law awaiting disposal by the same.[10]

The rule contained in S. 52 is also called the rule of lis pendens and makes transfers pendente lite, subject to the decision of the Court. As a principle of equity, justice and good conscience, this rule applies even where the Act does not apply.

It is a doctrine common to the courts both at law and Equity, and rests…upon this foundation that it would plainly be impossible that any action or suit could be brought to a successful termination, if alienation pendente lite were permitted to prevail. The plaintiff would be liable in every case to be defeated by the defendant’s alienating before the judgment or decree, and would be driven to commence his proceedings de novo subject again to be defeated by the same course of proceedings. If any decree or order is passed in such proceedings, any transfer of rights during inter regnum shall be determined as non est  in the eyes of law.[11]It is based on the principle that the person purchasing property from the judgment debtor during the pendency of the suit has no independent right to property to resist, obstruct or object execution of a decree.[12]

Doctrine Of Lis Pendens:A Critical Evaluation

The basic ingredients of the doctrine of lis pendens are:[13]

(i)     A litigation should be pending in a court of competent jurisdiction;

(ii)    The suit must be relating to a specific immovable property;

(iii)   The suit should not be collusive;

(iv)   The suit should relate to a right in this specific property;

(v)    Property should not be transferred or otherwise dealt with;

(vi)   By any party to the suit;

(vii)  So as to affect the rights of any party thereto;

(viii) Till the final disposal of the case.


APPLICATION OF SECTION 52

For the application of the Section 52 the following conditions have to be satisfied:

    A suit or a proceeding in which any right to immovable property is directly and specifically in question, must be pending;
    The suit or the proceeding shall not be a collusive one;
Such property during the pendency of such a suit or proceeding cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the right of any other party thereto under any decree or order which may be passed therein except under the authority of Court.[14]

For invoking the doctrine of lis pendens under S. 52 T.P. Act, the question whether the subsequent transferee was a party to the suit or not is not material.[15] Where the entire plots were in dispute, the transferee of even one third share in the plots was held bound by the result of the litigation in respect of all the plots then in dispute.[16] Section 52 imposes a prohibition on transfer or otherwise dealing with any property during the pendency of a suit provided the conditions laid down in the Section are satisfied.[17]

Any transfer of suit property or any dealing with such property during the pendency of the suit is prohibited except under the authority of the court, if such transfer or otherwise dealing with the property by any party to the suit or proceedings under any order or decree which may be passed in the said suit or proceeding.[18]There is statutory bar on alienation by the parties to the proceedings in respect of the suit property. If anybody wants to alienate, he can do so only with the permission of the Court. The intention of the legislature is that no party to the litigation can defeat the claim of other in case he succeeds in the litigation.[19]

The doctrine of lis pendens embodied in Section 52 is intended to prevent a party to a suit from making an assignment inconsistent with the rights which may be established in the suit and which might require a further party to be impleaded to make effectual the Court’s decree. The effect of Section 52 is not to wipe out a sale pendente lite altogether but to subordinate it to the rights based on the decree in the suit.[20]

NON-APPLICABILITY OF DOCTRINE

It is not the law that the doctrine of lis pendens would be applicable in every case. Rather there are many instances where this doctrine does not apply. Following are the instances:

(a)    A private sale by a mortgagee in exercise of power conferred by mortgage deed is not affected by the doctrine of lis pendens embodied in the section and the sale is valid, though made during the pendency of a redemption suit filed by the mortgagor.[21]

(b)   To cases of review.

(c)    When the transferor alone is affected.[22]

(d)   To an order passed against an intervenor in execution proceedings as the proper remedy in such cases is a suit under O. 21, r. 63 of the Code of Civil Procedure, 1908.

(e)    To a friendly suit.[23]

(f)    Where the proceedings are collusive.[24]

(g)   To yearly leases and such other acts as are either the necessary or the ordinary reasonable incidents of an interim beneficial enjoyment.[25]

(h)   To a transfer pending suit by a person who is not a party to such suit.[26]

(i)     To personal property other than the chattel interests in land.[27]

(j)     To the interval that lapses between dismissal of a suit and a fresh suit on the same cause of action.

(k)   Where the parties to the transfer are ranged on the same side.[28]

(l)     To transfer affected by order of the court in which suit or proceedings is pending.[29]

(m) Where there is misdescription of the property in the plaint.[30]

(n)   Where alienations are not inconsistent with the rights which may be established by the decree in the suit.[31]

(o)   The doctrine of lis pendens does not apply to the case of a person who, during the pendency of a mortgage suit obtains a mortgage of the property, in consideration for money paid by him and used by the mortgagor to pay off the suit mortgage.[32]

CRITICAL EVALUATION

Status of the transfer

The language of the section is prohibitive in nature. Section 52 uses the phrase ‘the property cannot be transferred or otherwise dealt with’. At the same time, the transfer pendente lite is not void,[33] but is only subject to the outcome of the litigation.[34]The transfer is thus voidable at the instance of the affected party,[35] except to the extent that it may conflict with rights decreed under the decree held to be valid and operative as between the parties.[36] The transferee only takes the title of the transferor subject to the result of pending legislation.[37] The rule does not annul the conveyance but only renders it subservient to the rights of the parties to the action, as determined by the decree.[38] The doctrine does not defeat any just and equitable claim, but only subjects them to the authority of the court dealing with the property to which claims are put forward.[39] The Apex Court has held[40]

“The effect of Section 52 is not to wipe it(transfer) out altogether but to subordinate it to the rights based on the decree in the suit. As between the parties to the transaction, however, it was perfectly valid and operated to vest the title of the transferor in the transferee.”

Right of alienee pendente lite to be pleaded as a party to the lis

The predominant view is that a transferee pendent lite cannot seek impleadment when transfer was affected during the pendency of appeal without the permission of the court[41] and with full knowledge that the status quo order was in existence.[42] The petitioner in the suit would be dominus litus, and if he wants to take a calculated risk, the court may not exercise its discretion to implead him,[43] and he cannot contend that he has any independent right over the suit property over and above the right of the seller who is a party to the lis.[44] The reason being that a person who violates the law can never be treated as holding a legal enforceable right[45] and thus a resistance at the instance of a transferee of judgment debtor during the pendency of the proceedings cannot be said to be resistance or obstruction by a person in his own right and he is therefore not entitled to get his claim adjudicated.[46] The Apex Court has explained the position in the following words:[47]

Where a party does not ask for leave, he takes the obvious risk that the suit may not be properly conducted by the plaintiff on record; yet he will be bound by the result of the litigation even though he is not represented at the hearing unless it is shown that the litigation was not properly conducted by the original party or he colluded with the adversary.

On the other hand, some High Courts[48] have expressed the opinion that after affecting a transfer of the property, the transferor would invariably not pursue the litigation as vigorously as he might have been doing previously. Since he obtains consideration, his interest in the litigation and also the property would diminish. He may even collude with the other party and the interest of the alienee would be adversely affected. Since due to the application of doctrine of lis pendens, the interests of the party to the lis are already protected, no harm would be done to him if the alienee is impleaded as a party. Rather in the interests of justice, both the parties should be given a fair chance at the trial. Thus the Orissa High Court held that a transferee pendent lite can be impleaded as a party to litigation.[49]

Right of any other party under the decree

The doctrine does not apply merely to actual transfers or rights which are the subject matter of litigation but to other dealings with it ‘by any party to the suit or proceedings, so as to affect the right of any other party thereto.[50] ‘Any other party’ means a person between whom and the party alienating there is an issue for decision, which might be prejudiced by the alienation.

The rule of lis pendens is enacted for the benefit of the third party, and not for the party making the transfer.[51] This statutory right is given to the party to the suit other than the alienating party, to have an alienation set aside so far as it is necessary for the protection of his own rights.[52]

Recommendation by Supreme Court

The Supreme Court also gave its recommendations to the Law Commission of India and

the Parliament recommending change in law in the following terms[53]:

It is necessary to refer to the hardship, loss, anxiety and unnecessary litigation caused on account of absence of a mechanism for prospective purchasers to verify whether a property is subject to any pending suit or a decree or attachment. At present, a prospective purchaser can easily find out about any existing encumbrance over a property either by inspection of the Registration Registers or by securing a certificate relating to encumbrances (that is copies of entries in the Registration Registers) from the jurisdictional Sub-Registrar under Section 57 of the Registration Act, 1908. But a prospective purchaser has no way of ascertaining whether there is any suit or proceeding pending in respect of the property, if the person offering the property for sale does not disclose it or deliberately suppresses the information. As a result, after parting with the consideration (which is many a time the life time savings), the purchaser gets a shock of his life when he comes to know that the property purchased by him is subject to litigation, and that it may drag on for decades and ultimately deny him title to the property. The pendente lite purchaser will have to wait for the litigation to come to an end or he may have to take over the responsibility of conducting the litigation if the transferor loses interest after the sale. The purchaser may also face objections to his being impleaded as a party to the pending litigation on the ground that being a lis pendens purchaser, he is not a necessary party. All these inconveniences, risks, hardships and misery could be avoided and the property litigations could be reduced to a considerable extent, if there is some satisfactory and reliable method by which a prospective purchaser can ascertain whether any suit is pending (or whether the property is subject to any decree or attachment) before he decides to purchase the property.

It is of some interest that a solution has been found to this problem in the States of Maharashtra by an appropriate local amendment to section 52 of the Act, by Bombay Act 4 of 1939. Section 52, as applicable in the Maharashtra and Gujarat,  It is wished that the Law Commission and the Parliament considers such amendment or other suitable amendment to cover the existing void in

title verification or due diligence procedures. Provision can also be made for compulsory registration of such notices in respect of decrees and in regard to attachments of immoveable properties.[5]

CONCLUSION

The right contemplated under Section 52 no doubt can be used both as a sword and a shield, depending on such facts as to (i) what rights or interest is transferred, (ii) who the affected party is, (iii)how and in what manner, the transfer is likely to ‘affect’ any party to the pending ‘proceedings’. It can be used as a shield in a subsequent or the same proceeding between the same parties. Any person who would like to use it as sword, must however, first establish his right to do so when, in any subsequent proceeding an objection is taken to his claim to do so. Indeed if the transfer was not avoided by any  of the parties to the earlier proceeding likely to be affected by such transfer, the transferee is not prevented from claiming that the right to avoid the transfer was lost and that nothing survived to be enforced.

In order that a transfer may be void as hit by the provisions of Section 52, it has to be established that it has affected the rights of any other party to the suit. If a party challenges a transfer on the basis of doctrine of lis pendens, it has to establish that the transfer was made with a view to affecting and defeating the rights of the plaintiff under a decree or order which may be passed in the case and that it has been defeated. By this doctrine, it is intended to strike at attempts by the parties to a suit to curtail the jurisdiction of the Court by private dealings which my remove the subject-matter of litigation from the power of the court to decide a pending dispute and frustrate its decree.