In a recent ruling, the Supreme Court emphasized that a subsequent purchaser of immovable property cannot claim the status of a ‘bona fide purchaser’ under Section 19(b) of the Specific Relief Act, 1963 (“the Act”) if they fail to perform due diligence regarding the status of the current possessor of the property at the time of purchase. The bench, comprising Justice J.B. Pardiwala and Justice R. Mahadevan, clarified that Section 19(b) protects bona fide purchasers who acquire property in good faith, for value, and without notice of prior contracts, but this protection is contingent on the purchaser’s proper inquiry into the property’s title and possession.
Section 19(b) allows for the enforcement of an agreement to sell against subsequent purchasers, but the burden of proof lies with the purchaser to demonstrate that they acted in good faith, with no knowledge of prior agreements. The case revolved around a dispute where the plaintiff had an oral agreement to purchase a property from the defendant, but the defendant later sold it to the appellants (subsequent purchasers), who were unaware of the plaintiff’s agreement. Despite the trial court ruling in favor of the plaintiff, the First Appellate Court set aside the decree, declaring the appellants as bona fide purchasers. The High Court, however, overturned this decision, finding that the appellants had failed to inquire into the property’s title and possession, and thus were not entitled to bona fide purchaser status.
The Supreme Court upheld the High Court’s ruling, stating that the appellants’ failure to conduct necessary due diligence disqualified them from the protections afforded to bona fide purchasers under Section 19(b). It highlighted that one of the key facts was that the plaintiff’s husband had been in possession of the property as a mortgagee, which should have raised red flags for the appellants.
In its judgment, the Court referred to earlier rulings, such as R.K. Mohammed Ubaidullah v. Hajee C. Abdul Wahab (2000), which held that actual possession of property serves as constructive notice of the possessor’s title. It emphasized the need for subsequent purchasers to verify the status of the possessor and the title at the time of purchase. Additionally, the Court cited Daniels v. Davison (1809), which held that when a tenant has possession with an agreement to purchase, a subsequent purchaser must inquire about the terms of that possession to avoid being bound by prior rights.
The Court also referenced the definitions of “good faith” under the Bhartiya Nyaya Sanhita, 2023, and the General Clauses Act, noting that a purchaser’s actions must demonstrate due care and attention, and not merely rely on the seller’s assertions. In this case, the appellants’ lack of such inquiry led to the Court concluding that they were not entitled to claim the protection of being bona fide purchasers. Consequently, the appeal was dismissed, and the plaintiff was entitled to seek specific performance of the oral agreement.
Case Details:
Case Title: Manjit Singh & Anr. v. Darshana Devi & Ors.
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