Case Note & Summary
The case involves a suit for specific performance of an agreement to sell a site allotted by the Bangalore Development Authority (BDA). The first defendant was allotted the site on 04.04.1979 under a lease-cum-sale agreement, with a prohibition on alienation for ten years under Rule 18(2) of the Bangalore Development Authority (Allotment of Sites) Rules, 1972. On 17.11.1982, within the prohibited period, the first defendant entered into an agreement to sell the site to the plaintiff, who paid the full consideration. The plaintiff sought specific performance after the first defendant refused to execute the sale deed. The Trial Court refused specific performance but ordered return of the amount paid. The High Court reversed, decreeing specific performance against the defendants, including the second defendant who purchased the property after the suit was filed. The Supreme Court allowed the appeals, holding that the agreement was unlawful as it violated the prohibition on alienation under Rule 18(2) and was opposed to public policy under Section 23 of the Indian Contract Act, 1872. The court set aside the decree for specific performance, but directed the return of the amount paid by the plaintiff with interest, as ordered by the Trial Court.
Headnote
A) Contract Law - Unlawful Agreement - Section 23 Indian Contract Act, 1872 - Agreement opposed to public policy - Agreement to sell BDA allotted site within ten-year prohibition period under Rule 18(2) of Bangalore Development Authority (Allotment of Sites) Rules, 1972 is unlawful and cannot be enforced by specific performance. The court held that such an agreement defeats the provisions of the law and is void. (Paras 6, 8-12) B) Specific Relief - Specific Performance - Section 23 Specific Relief Act, 1963 - Discretion of court - Court cannot grant specific performance of an unlawful agreement. The court held that even if the plaintiff paid full consideration, the agreement being unlawful, no decree for specific performance can be passed. (Paras 6, 12) C) Transfer of Property - Lis Pendens - Section 52 Transfer of Property Act, 1882 - Applicability - The doctrine of lis pendens does not apply to transfers made before the suit is filed. The court noted that the sale to second defendant occurred after the suit was filed, but the finding on lis pendens was not necessary given the agreement's unlawfulness. (Paras 6, 12) D) Property Law - BDA Allotment - Prohibition on Alienation - Rule 18(2) Bangalore Development Authority (Allotment of Sites) Rules, 1972 - Agreement to sell within prohibited period is void. The court held that the agreement between the first defendant and plaintiff, entered into within ten years of allotment, was in violation of the Rules and thus unlawful. (Paras 8-12)
Issue of Consideration
Whether an agreement to sell a site allotted by BDA within the ten-year prohibition period under Rule 18(2) is lawful and enforceable by specific performance.
Final Decision
The Supreme Court allowed the appeals, set aside the High Court's decree for specific performance, and restored the Trial Court's order directing return of Rs.50,000 with 9% interest per annum from the date of suit till payment.
Law Points
- Agreement to sell property within prohibited period of alienation is unlawful
- Section 23 of Indian Contract Act
- 1872
- Rule 18(2) of Bangalore Development Authority (Allotment of Sites) Rules
- 1972
- Doctrine of Lis Pendens
- Section 52 of Transfer of Property Act
- 1882
- Specific performance not granted for unlawful agreements
