9_lis Pendens_fraudulent Transfer And Part Performance.pdf

LIS PENDENS ,

FRAUDULENT TRANSFER AND PARTPERFORMANCE

Sections 52, 53 and 53A of Transfer of Property Act, 1882

LIS PENDENS  What does the phrase mean? – Lis (action / suit) + Pendens (pending)  Illustration: A (owner) – B (lessee) – C (to who the property has been transferred by B) – pending litigation in a court of competent jurisdiction – is C bound by a court order in favor of A?  Turner L.J. – “…rests upon the 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..”  What is the security afforded by this rule?  Pending litigation as notice? Simply a matter of public policy? What about a bona fide transferee without notice?

SECTION 52, TPA During the pendency in any Court ….. of any suit or proceeding which is not collusive and in which any right to immoveable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

UNDERSTANDING PENDENS  Look at the explanation to Section 52  Explanation. - For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, 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, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.  Filing of plaint + appeal + execution proceedings  Art.136 proceedings also covered here

DECONSTRUCTING SECTION 52  Court of competent jurisdiction – territorial, pecuniary, etc.  What if court returns a suit for want of pecuniary jurisdiction and later admits when filed before the competent court, is a transfer during this interim period hit by the rule of lis pendens?  Collusive suit – collusive maintenance suit by a hindu wife against her husband  Specific Right to immovable property which is directly and specifically in question  Party to the suit

DECONSTRUCTING SECTION 52  What is the outcome of an alienation hit by Section 52?  Unlike a normal instance, by virtue of lis pendens who all are bound by the court’s judgment here?  Note that this rule covers absolute and partial transfers pertaining to only immovable property  Do we need to add the transferee as a party to the proceeding?

JAYARAM MUDALIAR

V. AYYASWAMI AIR 1973 SC 569  What are the facts in the instant case?

 What had the karta done? How was Section 52 in question in the case?  What was the ratio of the case?

SUPREME GENERAL FILMS V.

MAHARAJA SIR BRIJNATH AIR 1975 SC 1810

 What are the facts in the instant case?  What were the terms of the compromise decree? What were the peculiar circumstances pertaining to the lease of the appellant?  How was Section 52 in question in the case? Was it about enforcing antecedent rights or creating new rights?  What was the ratio of the case?

PART PERFORMANCE – SECTION 53A Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,

and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract,

then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.

DECONSTRUCTING SECTION 53A  Who does this section seek to protect?  What should the transferor have done?  What is the requirement with respect to the agreement?  Why, so?  What is the difference in the position between Indian and English law?  Incomplete in what manner? Registration, whether needed?  Understanding contracts to transfer  Does it cover absolute or partial transfers?  Does the doctrine apply to gifts? What is the reason for your answer?  What should the transferee have done to have acted in part performance?  Should possession be taken in certain capacity?

DECONSTRUCTING SECTION 53A  Illustration: Agreement to sell property to take effect in the beginning of the financial year – transferee has been evicted from his earlier leased premises – transferor permits him to occupy the property to be transferred to him in April under the exceptional circumstances between February and March.  Would this possession count towards part performance?  If he is already in possession, what further act must he undertake? Payment of consideration?  Performed or is willing to perform his part of the contract  Doctrine of part performance – sword or shield? (note difference in position between Indian and English law)

 What happens if there is a bona fide transferee for value?

FRAUDULENT TRANSFER – SECTION 53 (1) (1) Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration. Nothing in this sub-section shall affect any law for the time being in force relating to insolvency. A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor shall be instituted on behalf of, or for the benefit of, all the creditors.

DECONSTRUCTING SECTION 53(1)  Who does this sub-section seek to protect?  Illustration 1: A man of extravagant and dissolute habits was persuaded to reform and make a settlement of his property on his wife and children. He subsequently relapsed and incurred debts. The settlement was held not voidable by subsequent creditors.  Who is a creditor? How is transfer to be interpreted?  What is meant by intent to defeat or delay creditors? – real transfer + fraudulent intention  Bona fide transferee v creditor  What is the effect of a transfer hit by this sub-section?

DECONSTRUCTING SECTION 53(1)  Illustration 2: A, a trader was in embarrassed circumstances. He secretly executed a usufructuary mortgage of all his property to his uncle B, the consideration being a fictitious book debt. One of the terms of the mortgage was that B should pay allowances to the wife and children out of such usufruct. The mortgage was voidable under Section 53 as it put of all of A’s property out of the reach of the creditors and reserved a benefit for A. Moreover, the secrecy with which he effected the transaction was evidence of fraudulent intention.  representative capacity

FRAUDULENT TRANSFER – SECTION 53 (2) (2) Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee. For the purposes of this sub-section, no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made.

C. ABDUL SHUKOOR SAHEB V. ARJI PAPA RAO AND ORS. AIR 1963 SC 1150  What are the facts of the case?  How was Section 53 of TPA involved?  Was the plaintiff a bona fide purchaser?

 What was the ratio of the case?