Read Time: 09 minutes

Synopsis

The Supreme Court recently observed that, in order to come to a conclusion that an act was done in good faith, it must have been done with due care and attention, and there should not be any negligence or dishonesty. Each aspect is a complement to the other, not an exclusion of the other, it noted.

A bench of Justices J B Pardiwala and R Mahadevan dismissed an appeal filed by Manjit Singh and another against the Punjab and Haryana High Court's judgment of January 22, 2019, in a regular second appeal.

The High Court had allowed the second appeal filed by the original plaintiff and thereby decreed the suit of the plaintiff, granting specific performance of the oral agreement of sale from 1986.

The respondent no. 1, Darshana Devi, instituted the suit for specific performance of the contract based on an unregistered sale deed of February 12, 1986, with respect to the suit property.

The original defendant no. 1, i.e., the owner of the suit property, after entering into an agreement with the plaintiff, transferred the suit property in favor of defendants no. 2 and 3, i.e., the appellants herein, Manjit Singh, by way of a sale deed of August 29, 1986.

The trial court allowed the suit in favor of the plaintiff. The subsequent purchasers, i.e., the petitioners, preferred the first appeal before the district court. The first appeal was allowed, and the decree passed by the trial court was quashed and set aside.

The plaintiff went before the High Court by way of a second appeal under Section 100 of the Civil Procedure Code, 1908.

The High Court, after due consideration of all the relevant aspects of the matter, recorded a categorical finding that the subsequent purchasers, i.e., the appellants herein, could not be said to be bona fide purchasers in accordance with Section 19(b) of the Specific Relief Act, 1963.

The apex court referred to R K Mohammed Ubaidullah Vs Hajee C Abdul Wahab (2000), which made it clear that Section 19(b) of the Act, 1963, is an exception from the general rule, and the onus is on the subsequent purchaser to prove that they purchased the property in good faith and also as a bona fide purchaser for value.

The bench cited Section 3(2) of the General Clauses Act, which defines ‘good faith’ as "a thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not".

It also noted Section 2(11) of the Bhartiya Nyaya Sanhita, 2023, which defines “good faith” as "Nothing is said to be done or believed in ‘good faith’ which is done or believed without due care and attention.”

The court thus said, "The definitions and the meaning of the term ‘good faith' indicate that in order to come to a conclusion that an act was done in good faith it must have been done with due care and attention and there should not be any negligence or dishonesty. Each aspect is a complement to the other and not an exclusion of the other. The definition of the Penal Code, 1860 emphasises due care and attention whereas General Clauses Act emphasises honesty."

The court referred to the leading case on the subject, relied on in a number of Indian decisions, Daniels Vs Davison (1809), in which the Lord Chancellor held that: “where there is a tenant in possession under a lease, or an agreement, a person purchasing part of the estate must be bound to inquire on what terms that person is in possession … that a tenant being in possession under a lease, with an agreement in his pocket to become the purchaser, those circumstances altogether give him an equity repelling the claim of a subsequent purchaser who made no inquiry as to the nature of his possession.”

In the instant case, the bench said, "In our opinion, no error—not to speak of any error of law—could be said to have been committed by the High Court in passing the impugned judgment and order."

The court dismissed the appeal, observing the plaintiff could now go for the execution of the decree passed by the Civil Court.

Case Title: Manjit Singh & Anr Vs Darshana Devi & Ors