A person claiming under a party to contract is, also bound by law

Ravikiran Shukre | Manikchand Pahade Law College, Aurangabad | 11th January 2020 

Sadanand Prasad Sharma v. Dhrubendra Nath Samantha [2010 (89) AIC 725]

Facts of the Case: 

1. A suit for specific performance was filed by plaintiff/appellant against defendant no. 1/ respondent no. 1 in this appeal. 
2. Suit was filed by the appellant/plaintiff as a consequence of breach of contract where he found that, suit property was transferred by the respondent no. 1 to respondent no. 2.
3. Therefore, he made an application under Order 1 Rule 10 read with section 151 of the Code of Civil Procedureseeking addition of the subsequent transferee. The Learned trial judge by order dated September 23, 2008, allowed the said application for the addition of party and subsequent transferee was added as defendant no. 2 in said suit.
4. The defendant no. 2 filed an application under Order 7 Rule 11 of Code of Civil Procedure Code for rejection of plaint contending, inter alia, that there has been no cause of action pleaded against him in the plaint. 
5. Simultaneously, the plaintiff, also, filed an application for amendment of the plaint alleging that the defendant No. 1 surreptitiously transferred the property in suit in favour of the defendant No. 2 during the subsistence of the contract for sale and that the defendant No. 2 had acquired the property in suit with full knowledge of the contract between the plaintiff and the defendant No. 1. The learned Trial Judge rejected the application for amendment of the plaint on the ground that the proposed amendment would cause serious prejudice to the defendant No. 2. 
6. The learned Trial Judge, also, rejected the plaint, by allowing the application filed by the defendant No. 2 for rejection of the plaint, holding that there was no cause of action pleaded against the defendant No. 2 in the original plaint.

Judgment:

1. It has been observed that trial court has not drawn to section 19 of the Specific Relief Act, 1963. The relevant provision of the Specific Relief Act, 1963 runs as under:  “S. 19. Relief against parties and persons claiming under them by subsequent title. Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against— (a) either party thereto  (b) any other person claiming under him by title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;”
2. The other sub sections of the section 19 are not concerned in the present matter. Section 19 enumerates the persons against whom contract may be specifically enforced. Under clause (b) of said section 19 a person claiming under a party to a contract is, also, bound by the contract. The liability of a transferee acquiring title from a party to a contract rests upon the antecedent liability of a party to the contract as the transferee acquired the property subject to the transferor’s pre-existing contractual obligations. Thus, a transferee with notice of the prior contract cannot escape the obligation. A suit for specific performance of contract is maintainable against such transferee. According to the said provision a subsequent transferee seeking to defend a suit for specific performance of an earlier contact is, inter alia, required to establish that his acquisition of title, including payment of money, was without the notice of the original contract.
3. In the case of Bhup Narain Singh v. Gokhul Chand Mahton^[1], reported in 61 Indian Appeals 115, the Judicial Committee while construing the provisions of section 27 of the Specific Relief Act, 1877, which is in pari materia with section 19(b) of the Specific Relief Act, 1963, observed as under:  “the section lays down a general rule that the original contract may be specifically enforced against a subsequent transferee, but allows an exception to that general rule, not to the transferor, but to the transferee, and in Their Lordships’ opinion, it is clearly for the transferee to establish the circumstances which will allow him to retain the benefit of a transfer which, prima facie, he had no right to get. Further, the subsequent transferee is the person within whose knowledge the facts as to whether he has paid and whether he had notice of the original contract lie, and the provisions of sections 103 and 106 of the Indian Evidence Act, 1872, have a bearing on the question. The plaintiff does not necessarily have knowledge of either matter.”
4. In this regard, it is not important that whether subsequent transferee acquired the property in good faith and without notice of original contract. In the facts and circumstances of the case, conclusion can be drawn that trial judge misdirected himself in rejecting application for the amendment of plaint and in rejecting plaint.
5. Supreme Court therefore, set aside the impugned order; and allowed the application for amendment of the plaint filed by the plaintiff and restore the suit to its original file and number by rejecting the application for rejection of the plaint filed by the defendant. No. 2.

^[1] Privy Council Appeal no. 1 of 1932 (From Patna: Appeal no. 22 of 1930)