Introduction

• This case was decided by the Hon’ble Supreme Court on 1^st August 2000 deals with the Doctrine of Constructive Notice concerning Section 19(b) and Section 20(2) of the Specific Relief Act, 1963, and Section 3 of the Transfer of Property Act, 1882, 1882 (TPA).

Facts

• The plaintiff took a shop on rent from the defendant and subsequently entered into a contract for the purchase of the shop.
• He paid part of the consideration on the date of the agreement and undertook to pay the remaining amount on the date of the execution of the sale deed.
• Six months later, the defendant sold the shop to a third party for the consideration of Rs 20,000.
• The plaintiff filed a suit seeking specific performance of a contract for the sale of a shop.
  • The trial court ruled in favor of the plaintiff.
• The purchasers, dissatisfied with the trial court's decision, filed an appeal in the High Court.
  • The HC's Single Judge found that the purchasers were bona fide purchasers without knowledge of the agreement between the plaintiff and the vendor.
  • The Single Judge dismissed the appeal, which was later upheld by a Division Bench of the High Court.
• The appellant (tenant) filed a Special Appeal before the SC, challenging the judgment.
  • The tenant argued that the purchasers had notice of the agreement between the plaintiff and the vendor.

Issue Involved

• Whether the third party purchased the disputed shop after paying the full price and had they no knowledge of the alleged agreement to sell?

Observations

• The SC set aside the judgments of the lower courts.
• The case was remanded to the Single Judge for a fresh decision on the validity of the agreement and the entitlement of the plaintiff to specific performance.
• The Court emphasized the importance of considering the provisions of Section 20(2) of the Specific Relief Act in deciding on specific performance.
• No costs were awarded due to the circumstances of the case.

Conclusion

• A statutory presumption of “notice” arises against any person who acquires any immovable property or any share or interest therein of the title.
• SC observed that, if a person is purchasing a property and he knows that a tenant is in possession of that property, then he ought to inquire about the terms of possession of that tenant.