Kiran Raj

The Supreme Court of India, Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan, while interpreting Section 19(b) of the Specific Relief Act, 1963, held that a subsequent purchaser who accepts a vendor’s statements without adequate verification cannot later invoke the defence of being a bona fide purchaser for value without notice. The dispute arose from the sale of agricultural land in Karnataka, where later buyers claimed protection against an earlier agreement to sell that had been unilaterally terminated by the vendor. The Bench found that the subsequent purchasers were aware of the prior contract and that the unilateral cancellation carried no legal validity, concluding that the original vendees retained the right to seek specific performance of the agreement.

The case concerned an Agreement to Sell (ATS) executed in April 2000 for approximately 354 acres of agricultural land situated in Haveri district, Karnataka. The original vendors agreed to transfer the property to a group of vendees for a total consideration of about Rs. 26 lakh, of which Rs. 2 lakh was paid as advance. In 2003, the vendors issued a notice unilaterally terminating the agreement, citing their inability to complete the transaction due to a subsisting status quo order in a pending civil proceeding and the demise of one of the vendors. The vendees, however, maintained that the contract remained valid and subsisting, as the termination was neither mutually consented to nor legally sustainable.

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In 2007, the same land was sold to a different set of purchasers through registered sale deeds. The original vendees, asserting their contractual rights, instituted Suit No. 36 of 2007 before the civil court seeking specific performance of the 2000 agreement. The trial court dismissed the suit for specific performance, directing refund of the advance amount along with damages as alternative relief. On appeal, the High Court reversed the decision, holding that the subsequent purchasers could not be regarded as bona fide purchasers for value without notice under Section 19(b) of the Specific Relief Act, 1963, and directed them to execute sale deeds in favour of the original vendees. Aggrieved, the subsequent purchasers approached the Supreme Court, arguing that they were protected under Section 19(b) as bona fide purchasers who had acted without knowledge of the earlier agreement.

The Supreme Court noted that the termination notice shown by the vendors to the appellants was clearly unilateral and therefore open to legal challenge. The Bench observed that the very language of the termination notice relied upon by the subsequent purchasers should have prompted them to make inquiries. The notice stated that the vendors were “unable to execute a sale deed” due to a status quo order in an earlier suit and the death of one of the vendors, and that they “could not wait indefinitely.”

The Court recorded that these reasons reflected the vendors’ personal inconvenience rather than any fault of the original vendees, rendering the termination “unilateral and self-serving.” It further noted: “Upon a bare reading of the said notice of termination, the subsequent purchasers ought to have made inquiries to ascertain whether the original vendees had challenged the termination by any subsequent communication.”

Turning to the plea of bona fide purchase, the Bench stated: “It is a trite law that a subsequent purchaser who relies merely on the assertions of the vendor or who chooses to remain content with his own limited knowledge while consciously abstaining from making further inquiry into the subsisting interests in the property cannot escape the consequences of deemed notice.”

The Court remarked: “Their deliberate abstention from this inquiry despite having the means readily available cannot be dismissed as mere oversight. It would constitute, in the words of Sir James Wigram VC, a ‘designed abstention for the very purpose of avoiding notice.’”

Referring to precedents such as Ram Niwas v. Bano, Durg Singh v. Ganeshram, and Jammula Rama Rao v. Rukmini Bai, the Bench stated that to claim protection under Section 19(b) of the Specific Relief Act, 1963, a purchaser must establish (a) purchase for value, (b) payment made in good faith, and (c) absence of notice—actual or constructive—of the earlier contract.

Examining the evidence, the Court found that the subsequent purchasers were aware that an Agreement to Sell dated 28.04.2000 existed, that Rs. 2 lakh had been paid as earnest money, that the vendors had sought to terminate the agreement due to their own inability arising from a status quo order, and that the vendees continued to contest proceedings until 2005.

Concluding, the Bench stated: “It is therefore beyond cavil that the subsequent purchasers cannot take shelter under Section 19(b) of the Act of 1963. Far from showing honesty and due care, their conduct reveals studied indifference to facts which were staring them in the face.”

The Court directed: “In view of the foregoing, the appeals fail and are hereby dismissed.”

“The Appellants are hereby directed to execute a sale deed in respect of the subject land in favour of the Respondent Nos. 15 to 22, respectively & the Respondent Nos. 1 to 5, respectively, and also hand over vacant and peaceful possession of the subject land to them within six months from the date of this judgment, subject to the fulfilment of directions issued by us in paragraphs 91 and 92, respectively, of this judgment.”

“In the peculiar facts of the present case, we deem it fit to direct the Respondent Nos. 15 to 22, respectively & the Respondent Nos. 1 to 5, respectively, to pay the balance sale consideration of Rs. 18,83,001/- with an interest at the rate of 16% p.a. from the date of the execution of the ATS, to the Appellants within a period of six months from the date of this judgment.”

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“Further, having regard to the fact that almost 18 years have passed by since the sale deeds in favour of the Appellants were executed, and with a view to do substantial justice, we direct the original vendees, i.e., the Respondent Nos. 15 to 22, respectively & the Respondent Nos. 1 to 5, respectively, to pay to the Appellants an additional amount of Rs. 5,00,00,000/- over and above the balance sale consideration with interest referred to above within a period of six months from the date of this judgment.”

“It is only after the balance sale consideration of Rs. 18,83,001/- with interest at the rate of 16% p.a. from the date of the execution of the ATS and the additional amount of Rs. 5,00,00,000/- is paid to the Appellants, that they shall proceed to execute the sale deed and hand over vacant and peaceful possession of the subject land to the Respondent Nos. 15 to 22, respectively & the Respondent Nos. 1 to 5, respectively.”

“In the event of any default on either side to comply with our aforesaid directions or in case of any other difficulty, the parties are at liberty to move to this Court. The pending applications, if any, shall stand disposed of.”

Case Title: K.S. Manjunath and Others v. Moorasavirappa @ Muttanna Chennappa Batil (since deceased) by his LRs and Others
Neutral Citation: 2025 INSC 1298
Case Number: Civil Appeal Nos. 13507–13508 of 2025 (arising out of SLP (C) Nos. 29405–29406 of 2017)
Bench: Justice J.B. Pardiwala; Justice R. Mahadevan