Lis Pendens Exemption in Specific Performance Suits

1. Factual Background and Procedural History

In the judgment of Earthz Urban Spaces Pvt. Ltd. vs. Ravinder Munshi & Ors. (FAO(OS) 79/2022), delivered by the High Court of Delhi on October 9, 2025, a Division Bench addressed the misuse of the doctrine of lis pendens in speculative real estate litigation.

The appeal was filed by the Appellant/Plaintiff (Earthz Urban Spaces) challenging an order dated 02.06.2022, passed by a learned Single Judge. The Appellant had instituted a suit for specific performance (CS(OS) No. 287/2022) to enforce an alleged agreement for the sale of a property in Pamposh Enclave, New Delhi (“suit property”).

The Appellant’s case was built on two alternative premises:

1. A binding oral agreement allegedly concluded on 27.04.2021, for a sale consideration of Rs. 26 crores, supposedly evidenced by WhatsApp messages and Zoom meetings.
2. A subsequent Memorandum of Understanding (MoU) executed between the parties on 02.06.2021.

The Appellant claimed to have made a part-payment of Rs. 12 lakhs (partly by cheque, partly in cash), which the Respondents/Defendants vehemently denied receiving or encashing .

In the Impugned Order dated 02.06.2022, the learned Single Judge, at the summons stage, dismissed the Appellant’s application for an interim injunction (under Order XXXIX Rules 1 and 2 CPC). More significantly, the Single Judge held that the suit property would stand exempted from the applicability of the doctrine of lis pendens as embodied under Section 52 of the Transfer of Property Act, 1882 (TP Act).

The Single Judge’s reasoning was that the electronic communications merely indicated ongoing negotiations , the MoU was expressly non-binding , the Appellant failed to produce conclusive proof of payment , and the Appellant had suppressed material facts by selectively filing WhatsApp transcripts. Aggrieved by this order, the Appellant preferred the present appeal before the Division Bench.

2. Identification of Legal Issues

The Division Bench was primarily concerned with the following legal questions:

• Whether the learned Single Judge was correct in finding that the Appellant had failed to establish a prima facie case of a concluded agreement for sale?
• Whether the MoU dated 02.06.2021, which expressly stated it was non-binding, superseded any alleged prior oral agreement?
• Whether a court, at a preliminary stage and without a formal application from the defendant, has the jurisdiction to exempt a suit property from the rigours of the doctrine of lis pendens (Section 52, TP Act)?
• Whether the Appellant’s suit was prima facie a speculative or vexatious litigation designed to misuse the judicial process, thereby justifying the exemption from lis pendens?

3. Arguments of the Parties

Arguments of the Appellant (Earthz Urban Spaces)

• The Appellant contended that the learned Single Judge exceeded his jurisdiction by granting an exemption from Section 52 of the TP Act, especially since the Respondents had not filed any formal application seeking such relief.
• The suit was premised on a valid oral agreement dated 27.04.2021, which was supported by contemporaneous electronic evidence (WhatsApp messages and Zoom transcripts) establishing a consensus ad idem.
• The subsequent MoU dated 02.06.2021 was intended only to facilitate favourable tax treatment for the Respondents and did not negate the binding nature of the already concluded oral agreement.
• The Single Judge erred by deciding substantial questions of fact and law at the preliminary stage of issuance of summons.
• In the alternative, the Appellant argued that even if the exemption from lis pendens were upheld, the court ought to have imposed conditions to secure the Appellant’s projected profits, estimated at Rs. 6-7 crores .

Arguments of the Respondents (Ravinder Munshi & Ors.)

• The Respondents strongly supported the Impugned Order, relying heavily on the express clauses of the MoU dated 02.06.2021.
• Clause 1 of the MoU explicitly stated: “This Document does not create a binding agreement… and will not be enforceable. Absolutely no rights will be created in favour of either party… including right to ask for damages or execution of a Sale Deed.”. It further clarified that “Only the Sale Deed, duly executed… will create legal rights”.
• Clause 12 reiterated that “nothing contained in this Documents constitutes a contractual obligation”.
• The Respondents argued that this MoU, by the Appellant’s own admission in the Plaint, superseded all prior communications.
• Crucially, the Appellant’s own legal notice dated 27.08.2021 (issued before the suit) relied only on the MoU and made no reference to the alleged oral agreement, which was set up for the first time in the Plaint.
• The Respondents categorically denied receiving any payment, noting one cheque was drawn in a mis-spelt name and no proof of encashment was produced.
• They contended that the Appellant, a builder, had instituted a contrived narrative to “embroil the suit property in litigation with the ulterior motive of rendering it a pariah in the real estate market”.

4. Court’s Analysis and Reasoning

The Division Bench found “no infirmity” in the learned Single Judge’s order and dismissed the appeal.

On the Merits of the Agreement

The Court held that the Appellant’s suit rested on an “inherently fragile foundation”.

1. Contradiction in Pleadings: The Court noted a fatal contradiction: the Appellant’s pre-suit legal notice dated 27.08.2021 unequivocally relied only on the MoU dated 02.06.2021. However, the Plaint was premised on an alleged prior oral agreement. This discrepancy indicated that the oral agreement was an afterthought, set up to circumvent the MoU’s fatal flaws.
2. Explicitly Non-Binding MoU: The Court found the MoU’s language to be explicit. Clauses 1 and 12 clearly established that the document was non-binding, created no enforceable rights, and expressly precluded any party from claiming specific performance . The very document the Appellant relied upon “directly militates against the grant of specific performance”.
3. Absence of Consideration: The Court highlighted the Appellant’s “failure to demonstrate payment of any consideration”. No receipts for the alleged cash payment or evidence of cheque encashment were produced. Citing Section 10 of the Indian Contract Act, 1872, the Court underscored that lawful consideration is an “indispensable element” for an enforceable contract, and it was “wholly absent” in this case .

On the Doctrine of Lis Pendens (Section 52, TP Act)

This formed the crux of the Court’s analysis. The Bench heavily relied on the principles articulated by the Hon’ble Supreme Court in Vinod Seth v. Devender Bajaj (2010) 8 SCC 1.

• The Problem of Misuse: The Court acknowledged the “ground reality” that the doctrine of lis pendens is often misused. “Adventurers in real estate” and “speculators” file “vexatious, false or frivolous” suits for specific performance.
• Creating a “Cloud on Title”: The pendency of such a suit, even without an injunction, “shackles the suit property”. It “create[s] a cloud over the title” , making the property commercially unviable and restricting the genuine owner’s “freedom to sell the property and secure a fair market price”. This misuse is a “weapon of harassment”.
• The Court’s Inherent Power: The Court affirmed the principle, citing Vinod Seth, that Section 52 of the TP Act itself provides the Court with the power “to exempt the suit property from the operation of Section 52 subject to such conditions it may impose”.
• Application to the Present Case: The Court declared this a “fit case” for such an exemption. It found that the Appellant’s suit was ex facie “speculative litigation” and “adventurous”. The suit was “instituted not to enforce any legitimate contractual right but to create a cloud over the title of the property and thereby impede its marketability”.
• Upholding Equity: The Court concluded that permitting lis pendens to operate in this case “would be to reward a litigant who has sought to misuse the equitable jurisdiction of this Court for commercial leverage”.

5. Final Conclusion and Holding

The Division Bench held that the learned Single Judge was correct in exempting the suit property from the operation of Section 52 of the Transfer of Property Act.

The Court dismissed the appeal, finding it “devoid of merit” and a “clear abuse of the process of law”. It further imposed exemplary costs of Rs. 5,00,000/- on the Appellant, payable to the Respondents.

Finally, the Court clarified that all observations made in the order were prima facie for the purpose of deciding the appeal, and the suit itself shall proceed uninfluenced by them.

FAQs:

1. What does ‘lis pendens’ mean in a property dispute?

“Lis pendens” (Latin for “suit pending”) is a legal doctrine found in Section 52 of the Transfer of Property Act. It means that if a property is the subject of a lawsuit, any sale or transfer of that property during the lawsuit is subject to the court’s final decision. This effectively creates a “cloud” on the property’s title, making it very difficult for the owner to sell or mortgage it until the case is resolved.

2. Can a court ever allow a property to be sold even if a lawsuit is pending?

Yes, in appropriate cases. The court in which the suit is pending has the power to exempt the property from the lis pendens doctrine. A court may exercise this power if it believes prima facie (at first glance) that the lawsuit is frivolous, vexatious, or has been filed in bad faith by a “speculative litigant” simply to harass the owner and block the property’s sale.

3. Is an oral agreement to sell property legally valid?

While an oral agreement can theoretically be a valid contract, proving its existence in a property sale is extremely difficult. The person claiming the oral agreement must provide very strong, clear, and unambiguous evidence to the court that all essential terms (like the exact price, property details, payment terms, and timelines) were fully and finally agreed upon by all parties, and that it wasn’t just a negotiation.

4. What is the difference between a binding MoU and a non-binding one?

A Memorandum of Understanding (MoU) can be either. A binding MoU acts as a concluded contract, outlining enforceable rights and obligations. In contrast, a non-binding MoU (often called a ‘term sheet’ or ‘letter of intent’) is merely an agreement to agree. It outlines the intention of the parties to enter into a future contract (like a formal Sale Deed) but is not, by itself, enforceable in court. The document’s specific wording, especially clauses that explicitly deny enforceability, is crucial.

5. What do I need to prove to win a ‘specific performance’ lawsuit for a property?

To win a suit for specific performance (which forces a party to execute a sale deed), you must prove several key elements:

• A valid, concluded, and enforceable contract existed (not just negotiations).
• The terms of the contract are clear and unambiguous.
• You have paid, or were always ready and willing to pay, your part of the agreement (the consideration).
• You have approached the court in good faith and have not suppressed any material facts.

Stay informed with insights that matter. Follow us for more updates on key legal developments.

Disclaimer

The content provided here is for general information only; it does not constitute legal advice. Reading them does not create a lawyer-client relationship, and Mahendra Bhavsar & Co. disclaims all liability for actions taken or omitted based on this content. Always obtain advice from qualified counsel for your specific circumstances. © Mahendra Bhavsar & Co.