The Supreme Court of India, in the case of Shyam Kumar Inani v. Vinod Agrawal & Ors., decided on 12th November 2024 addressed pivotal issues in property law involving agreements to sell, possession, and the role of Power of Attorney (POA) holders. This case sheds light on the evidentiary and procedural standards governing such disputes and provides significant clarity on the application of doctrines like lis pendens.
Case Overview
The plaintiffs (buyers) sought specific performance of agreements to sell ancestral property from the defendants (sellers). The litigation involved multiple issues, including the competence of a Power of Attorney holder as a witness, the validity of unregistered agreements, the applicability of lis pendens, and allegations of fraud. A key aspect of the case was the defendants’ sale of the property to third parties despite an injunction.
Issues and Arguments
1. Competence of the Power of Attorney Holder as a Witness
Plaintiffs’ Argument:
The plaintiffs presented the Power of Attorney holder, who had witnessed the execution of the agreements, as their key witness. They argued that the Power of Attorney holder had firsthand knowledge of the transactions and could provide a reliable account of the circumstances under which the agreements were signed.
Defendants’ Argument:
The defendants contested the competence of the Power of Attorney holder as a witness, arguing that their testimony lacked credibility and was insufficient to establish the validity of the agreements.
Court’s Conclusion:
The Court held that a Power of Attorney holder, who has directly witnessed the execution of an agreement, is a competent witness under Indian law. The testimony of the Power of Attorney holder was supported by corroborative evidence, including the original title documents, rendering the plaintiffs’ case credible.
2. Validity of Unregistered Agreements to Sell
Plaintiffs’ Argument:
The plaintiffs contended that the agreements to sell, though unregistered, were valid as they were executed with mutual consent, consideration had been paid, and possession had been delivered. They provided original documents and testimony to support their claim.
Defendants’ Argument:
The defendants argued that the unregistered agreements were invalid under the Registration Act, 1908, as they involved immovable property and lacked precise boundary descriptions, making them vague and unenforceable.
Court’s Conclusion:
The Court rejected the defendants’ argument, stating that unregistered agreements to sell can still be valid if executed with mutual consent and supported by credible evidence. The property was identifiable through attached descriptions, and the plaintiffs’ possession and payment of full consideration demonstrated the agreement’s enforceability.
3. Doctrine of Lis Pendens and Subsequent Transfers
Plaintiffs’ Argument:
The plaintiffs invoked the doctrine of lis pendens under Section 52 of the Transfer of Property Act, asserting that the sales to third parties during litigation were subject to the outcome of the case. They argued that the defendants acted in bad faith by alienating the property despite being aware of the pending suit.
Defendants’ Argument:
The defendants claimed that the subsequent purchasers were bona fide buyers for value without notice of the ongoing litigation, and therefore, the transactions should be upheld.
Court’s Conclusion:
The Court upheld the doctrine of lis pendens, emphasizing that subsequent transfers during litigation are not void but are subject to the rights of the original parties. The third parties were deemed to have constructive notice of the litigation, making their claims subordinate to the plaintiffs’ rights.
4. Readiness and Willingness of the Plaintiffs
Plaintiffs’ Argument:
The plaintiffs demonstrated their readiness and willingness to perform their contractual obligations by paying the full consideration and taking possession of the property. They argued that their actions satisfied the requirements of Section 16(c) of the Specific Relief Act.
Defendants’ Argument:
The defendants challenged the plaintiffs’ claim of readiness and willingness, alleging delays and failure to fulfill contractual obligations on their part.
Court’s Conclusion:
The Court ruled in favor of the plaintiffs, finding that they had consistently demonstrated their readiness and willingness to perform the contract. Their possession of the property and payment of the entire consideration substantiated their claim.
5. Allegations of Fraud and Violation of Injunction Orders
Plaintiffs’ Argument:
The plaintiffs accused the defendants of violating an injunction order by alienating the property to third parties. They also alleged that the defendants’ actions amounted to fraud, as they misrepresented their authority to sell the property and attempted to deprive the plaintiffs of their legitimate rights.
Defendants’ Argument:
The defendants denied the allegations of fraud, arguing that the transactions were lawful and that the plaintiffs had failed to provide sufficient evidence to prove misconduct.
Court’s Conclusion:
The Court condemned the defendants’ actions, emphasizing that violations of injunctions undermine judicial authority. The fraudulent conduct of the defendants in alienating the property without the plaintiffs’ consent invalidated the subsequent transactions concerning the plaintiffs’ share.
Final Reliefs Granted
- Specific Performance:
The Court directed the defendants to specifically perform the agreements to sell in favor of the plaintiffs. - Doctrine of Lis Pendens Applied:
The subsequent sale deeds were declared binding only to the extent of the defendants’ share, not the plaintiffs’ undivided share. - Possession:
The plaintiffs were granted possession of their rightful share in the property. - Mesne Profits:
The Court awarded mesne profits to the plaintiffs for the unauthorized use of their share of the property. - Injunction:
A permanent injunction was issued restraining the defendants from further alienating the property.
Key Takeaways
This judgment reinforces several critical legal principles:
- Competence of POA Holders: A POA holder with personal knowledge can be a competent witness.
- Validity of Agreements to Sell: Unregistered agreements are enforceable if supported by credible evidence.
- Doctrine of Lis Pendens: Protects parties from adverse claims arising from transactions during litigation.
- Readiness and Willingness: A vital criterion for specific performance.
- Fraudulent Conduct: Courts take a strict stance against violations of injunctions and fraudulent practices.
This case serves as a precedent for property disputes, safeguarding contractual rights while addressing procedural and substantive legal questions.
The full judgment is available for download at: Power of Attorney Holder as Vendee Can Give Evidence on Agreement to Sell – Supreme Court Judgment
