Transfer of Property Act, 1882 (TPA) – Section 55(6)(b) – Buyer’s Charge – Specific Relief Act, 1963 (SRA) – Section 19(b) – Protection of Subsequent Transferee – TPA Section 100 – Protection Against Charges – Bona Fide Purchaser.
HIGH COURT OF KERALA
Current Case: RFA NO. 638 OF 2008
Original Case: OS NO.245 OF 2004, Principal Sub Court, Kottayam
Judgment Dated: August 6, 2025
Judge: The Honourable Mr. Justice C. Pratheep Kumar
Where an agreement for sale of a property was subsisting, the 1st defendant (seller) clandestinely executed a sale deed of the same property in favor of the 2nd defendant. The plaintiff, who had the prior agreement for sale with the 1st defendant, filed a suit for specific performance.
Facts:
The plaintiff (buyer under an agreement for sale) entered into an agreement (Exhibit A1) with the 1st defendant on July 31, 2003, for a total consideration of Rs. 8,00,000/-.
An advance amount of Rs. 5,05,000/- was paid, and the sale deed was to be executed by March 24, 2004.
The 1st defendant breached the contract by executing a sale deed (Exhibit A2) in favor of the 2nd defendant on November 18, 2003, before the plaintiff could get the sale deed executed.
The sale consideration in Exhibit A2 was only Rs. 1,00,000/-, significantly less than the amount in Exhibit A1.
The 2nd defendant claimed to be a bona fide purchaser without notice of the prior agreement.
The property was mortgaged to Kottayam District Cooperative Bank for Rs. 3,00,000/- (later revealed as higher liabilities) and was also under court attachments in O.S. No. 273/2003 (Munsiff’s Court, Alappuzha), O.S. No. 458/2003 (Sub Court, Kottayam), and O.S. No. 459/2003 (Sub Court, Kottayam).
The court found that the 2nd defendant was aware of the encumbrances on the property prior to purchase.
The court also found that the 2nd defendant was a close associate of the 1st defendant, and their decision to purchase a highly encumbered property at a low price was not bona fide.
Trial Court’s Decision:
The prayer for specific performance was declined.
However, the 1st defendant was directed to repay the advance amount of Rs. 5,05,000/- to the plaintiff.
A charge was created on the plaint schedule property for this amount.
Issues on Appeal:
Whether a charge under Section 55(6)(b) of the Transfer of Property Act will lie even against a bona fide purchaser for consideration?
Whether the 2nd defendant is entitled to protection under Section 19(b) of the Specific Relief Act?
High Court’s Observation & Decision:
The High Court confirmed the trial court’s finding that the plaintiff was always ready and willing to perform his part of the contract, and the breach was solely due to the 1st defendant’s default.
The court reiterated that Section 55(6)(b) of the TPA provides a statutory charge to a buyer on the property for the purchase money properly paid, enforceable against the seller and all persons claiming under him.
After the 1929 amendment to Section 55(6)(b) TPA, notice to the subsequent purchaser about the charge has become irrelevant.
While Section 19(b) SRA protects bona fide purchasers from specific performance, the charge under Section 55(6)(b) TPA is a distinct statutory provision.
Citing Delhi Development Authority v. Skipper Construction CO.(P) Ltd., and Others ((2000) 10 SCC 130) and Krishnamenon v. Pradeep Kumar and Anr. (2017 1 KHC 283), the court emphasized that the statutory charge under Section 55(6)(b) TPA is available even against a bona fide transferee for value from the seller.
In the present case, the court found no evidence to prove that the 2nd defendant was a bona fide purchaser for value. His knowledge of significant encumbrances, the disproportionately low sale price, and his close association with the 1st defendant indicated a lack of good faith.
Therefore, the High Court affirmed that the trial court was justified in creating a charge on the plaint schedule property for the advance amount.
Verdict: The appeal was dismissed, and the judgment and decree of the trial court were upheld.
