Vidur Impex & Traders Pvt. Ltd. v. Tosh Apartments Pvt. Ltd. (2012)

Introduction

The question of whether a purchaser of property during the pendency of litigation can be impleaded as a party is closely connected with Order I Rule 10(2) of the Code of Civil Procedure, 1908 and the doctrine of lis pendens under Section 52 of the Transfer of Property Act, 1882.

Vidur Impex & Traders Pvt. Ltd. v. Tosh Apartments Pvt. Ltd., (2012) 8 SCC 384, is an important Supreme Court decision dealing with the impleadment of purchasers who acquired the suit property during pending litigation and, more importantly, in violation of an injunction order.

The Supreme Court laid down broad principles governing applications for impleadment and held that although a purchaser pendente lite may, in appropriate circumstances, be added as a party, a purchaser whose conduct is contumacious, who benefits from a clandestine transaction, or who acquires the property in violation of a court’s restraint order cannot ordinarily claim such relief.

The case is particularly important for understanding the relationship between Order I Rule 10(2) CPC, Order XXII Rule 10 CPC and Section 52 of the Transfer of Property Act.

Case Details

Case Name

Vidur Impex & Traders Pvt. Ltd. & Others v. Tosh Apartments Pvt. Ltd. & Others

Year

2012

Citation

(2012) 8 SCC 384

Court

Supreme Court of India

Bench

G.S. Singhvi and S.J. Mukhopadhaya, JJ.

Case Numbers

Civil Appeal No. 5918 of 2012 and Civil Appeal No. 5917 of 2012

Date of Judgment

21 August 2012

Relevant Provisions

• Order I Rule 10(2), Code of Civil Procedure, 1908
• Order XXII Rule 10, Code of Civil Procedure, 1908
• Section 52, Transfer of Property Act, 1882

Subject Matter

Impleadment of subsequent purchasers, transferee pendente lite, lis pendens, violation of injunction orders, necessary and proper parties, and judicial discretion under Order I Rule 10(2) CPC.

Facts of the Case

The dispute concerned property situated at 21, Aurangzeb Road, New Delhi.

The property had originally been leased to members of the Khanna family. Over time, rights in the property came to be vested in Pradeep Kumar Khanna, who was one of the principal defendants in the subsequent litigation.

Pradeep Kumar Khanna had entered into several transactions concerning the property, including mortgage arrangements and agreements relating to its development.

On 13 September 1988, he entered into an agreement for sale with Tosh Apartments Pvt. Ltd. for a consideration of approximately ₹2.5 crores.

Tosh Apartments subsequently instituted a suit for specific performance of the agreement.

While the litigation was pending, the Delhi High Court passed an injunction restraining the owner from alienating the property or creating any third-party interest in it.

Despite the restraint order, Pradeep Kumar Khanna entered into transactions with Vidur Impex & Traders Pvt. Ltd. and five other companies.

Agreements for sale were executed, followed by registered sale deeds in favour of the appellants. The appellants subsequently entered into an agreement for sale in favour of Bhagwati Developers Pvt. Ltd.

These transactions were undertaken despite the pending litigation and the existing injunction against alienation.

The purchasers then sought to be impleaded as defendants in the pending suit for specific performance.

The Delhi High Court rejected their applications for impleadment.

The matter was thereafter brought before the Supreme Court.

Issues Before the Court

1. Whether Vidur Impex and the other purchasers could be impleaded as parties to the pending suit for specific performance?
2. Whether a transferee pendente lite has an absolute right to be impleaded under Order I Rule 10(2) CPC?
3. Whether purchasers who acquired the property in violation of an injunction order could claim the status of proper or necessary parties?
4. What principles should govern applications for impleadment by subsequent purchasers?
5. What is the effect of Section 52 of the Transfer of Property Act on transfers made during pending litigation?

Arguments of the Parties

Appellants

The appellants argued that they had acquired an interest in the suit property through the sale transactions and that their presence was necessary for the effective adjudication of the dispute.

They contended that because they had acquired rights in the property, they should be permitted to participate in the pending proceedings and protect their interests.

They also relied upon the principle that a transferee pendente lite can, in appropriate circumstances, be added as a party to pending litigation.

Respondents

Tosh Apartments opposed the impleadment.

It was argued that the appellants were complete strangers to the original agreement for sale and had acquired the property during the pendency of litigation.

More importantly, the transactions in favour of the appellants had been entered into in clear violation of the injunction order passed by the Delhi High Court.

The respondents therefore argued that the appellants could not rely upon their own conduct in seeking equitable relief from the court.

Judgment of the Supreme Court

The Supreme Court dismissed the appeals and upheld the refusal to implead the appellants.

The Court found that the transactions in favour of the appellants were clandestine transactions carried out in violation of the injunction order.

Consequently, the Court held that the agreements for sale and sale deeds executed in favour of the appellants did not have the legal sanctity necessary to confer enforceable rights upon them for the purpose of seeking impleadment.

The Court also laid down a set of broad principles governing applications for impleadment under Order I Rule 10(2) CPC.

Principles Governing Impleadment

The Supreme Court summarised the general principles that should guide courts while deciding applications for impleadment.

1. Court Can Add Parties at Any Stage

The court has the power to implead a person at any stage of the proceedings, either on an application made by an existing party or otherwise.

The essential consideration is whether the person ought to have been joined or whether their presence is necessary for the effective and complete adjudication of the issues involved in the suit.

2. Necessary Party

A necessary party is a person who ought to be joined as a party and in whose absence an effective decree cannot be passed.

If the person is absent, the court cannot effectively determine or grant the relief involved in the suit.

3. Proper Party

A proper party is a person whose presence would enable the court to completely, effectively and properly adjudicate upon all matters and issues involved in the litigation.

A proper party need not necessarily be a person against whom a decree is sought.

4. No Impleadment Without Being Necessary or Proper

If a person is neither a necessary nor a proper party, the court cannot compel their impleadment against the wishes of the plaintiff.

This reinforces the principle that Order I Rule 10(2) is not an unrestricted power to introduce anyone connected with the subject matter of the dispute.

Transferee Pendente Lite

The Court considered the position of a person who acquires property during the pendency of litigation.

A transferee pendente lite does not have an absolute right to be impleaded in every case.

The court retains discretion to decide whether the purchaser should be brought on record.

This is because the effect of the transfer depends upon the nature of the purchaser’s interest, the circumstances in which the transfer took place and the purchaser’s conduct.

The Court therefore rejected the idea that every purchaser pendente lite automatically becomes entitled to participate in the pending litigation.

When Can a Subsequent Purchaser Be Impleaded?

The Supreme Court held that in a suit for specific performance, a purchaser may be impleaded where:

• the purchaser’s conduct is above board;
• the purchaser applies for impleadment within a reasonable time after acquiring knowledge of the pending litigation; and
• the purchaser has a genuine and substantial interest in the subject matter of the litigation.

Such a purchaser may be considered a proper party because their interest could be directly affected by the final decree.

Therefore, being a subsequent purchaser is not by itself a bar to impleadment.

The decisive factor is the overall circumstances surrounding the transaction.

When Can Impleadment Be Refused?

The Court identified circumstances in which the court would be justified in refusing impleadment.

These include situations where:

1. the applicant has acted contumaciously;
2. the applicant is the beneficiary of a clandestine transaction;
3. the transaction was entered into in violation of a restraint or injunction order; or
4. the application for impleadment has been unduly delayed.

In such circumstances, the court is justified in refusing to exercise its discretion in favour of the purchaser.

Application of the Principle to the Facts

The appellants in the present case were complete strangers to the original agreement for sale between Tosh Apartments and Pradeep Kumar Khanna.

They entered the picture only after the owner entered into transactions with them during the pendency of the specific performance suit.

The Court found that the transactions were not ordinary commercial transactions entered into without knowledge of the litigation.

They were undertaken despite an injunction restraining the owner from alienating the property or creating third-party interests.

The Court therefore characterised the transactions as clandestine and in clear violation of the court’s order.

Consequently, the appellants could not claim the benefit of the discretionary power under Order I Rule 10(2).

Doctrine of Lis Pendens

The case also discusses the doctrine of lis pendens under Section 52 of the Transfer of Property Act.

The doctrine is based on the principle that during pending litigation, parties should not be permitted to alter the subject matter of the dispute in a manner that affects the rights of the other parties.

For the doctrine to apply, certain conditions must generally exist:

1. There must be a suit or proceeding pending before a court of competent jurisdiction.
2. The proceeding must not be collusive.
3. The litigation must directly and specifically concern rights in immovable property.
4. There must be a transfer or other dealing with the property by a party to the litigation.
5. The transfer must affect the rights of another party under the decree or order that may ultimately be passed.

The purpose is to preserve the authority of the court and protect the rights of parties from being defeated through transfers made during litigation.

Section 52 TPA and Transfer During Litigation

An important point is that the doctrine of lis pendens does not necessarily mean that every transfer made during litigation is completely void.

The transferee’s rights remain subject to the result of the pending litigation.

Thus, a transferee pendente lite cannot claim an independent position superior to the rights being adjudicated in the pending proceedings.

The transfer remains subject to the decree that may ultimately be passed by the court.

However, the present case involved something more serious than an ordinary transfer pendente lite.

The transactions were made in direct violation of an injunction order.

This conduct was central to the Supreme Court’s refusal to allow the purchasers to enter the litigation as parties.

Difference Between Ordinary Pendente Lite Transfer and Violation of Injunction

This distinction is extremely important.

A person who purchases property during litigation, without acting improperly, may in appropriate circumstances be impleaded.

But a person who knowingly purchases the property in violation of a court order cannot automatically demand the same treatment.

The court’s discretionary power under Order I Rule 10(2) is not intended to protect or reward a person who deliberately participates in a transaction designed to defeat pending litigation.

Therefore:

Ordinary transfer pendente lite → Impleadment may be permitted depending on circumstances.

Transfer pendente lite in violation of injunction → Strong ground for refusing impleadment.

Relation With Thomson Press

The judgment should be carefully distinguished from Thomson Press (India) Ltd. v. Nanak Builders & Investors Pvt. Ltd., (2013) 5 SCC 397.

In Vidur Impex, the purchasers acquired the property in violation of an existing injunction and their conduct was found to be clandestine.

In Thomson Press, the Supreme Court subsequently dealt with a different factual situation and held that a subsequent transferee could be impleaded even though the transfer had occurred during litigation, while remaining subject to the rights arising from the pending proceedings.

The important lesson is that the mere fact of a pendente lite transfer does not automatically determine the question of impleadment.

The court must examine the circumstances of the transaction, the purchaser’s conduct and the nature of the interest acquired.

Legal Principles Established

1. Impleadment Is Discretionary

Order I Rule 10(2) CPC gives the court discretion to add necessary or proper parties.

2. Necessary Party

A necessary party is one without whom an effective decree cannot be passed.

3. Proper Party

A proper party is one whose presence enables complete, effective and proper adjudication of the dispute.

4. Subsequent Purchaser Has No Automatic Right

A transferee pendente lite cannot demand impleadment as a matter of right.

5. Bona Fide Conduct Matters

A purchaser who acts properly and approaches the court within a reasonable time may be impleaded in an appropriate case.

6. Clandestine Transactions Are Treated Differently

A purchaser who benefits from a clandestine transaction cannot ordinarily claim favourable discretionary relief.

7. Violation of Injunction Is Significant

A transfer made in violation of a court’s restraint order can justify refusal of impleadment.

8. Delay Can Defeat Impleadment

Even where a purchaser has an interest in the property, an undue delay in seeking impleadment may justify rejection of the application.

9. Lis Pendens Protects Pending Litigation

Section 52 TPA prevents parties from defeating the effect of pending litigation by transferring the disputed property during the proceedings.

Ratio Decidendi

The ratio of Vidur Impex & Traders Pvt. Ltd. v. Tosh Apartments Pvt. Ltd. is that a transferee pendente lite does not have an absolute right to be impleaded in a pending suit. In a suit for specific performance, the court may implead a subsequent purchaser whose conduct is above board and who approaches the court within a reasonable time after acquiring knowledge of the litigation. However, where the purchaser is guilty of contumacious conduct, benefits from a clandestine transaction, acquires the property in violation of a restraint order, or unduly delays the application, the court is justified in refusing impleadment.

The decision therefore places the purchaser’s conduct at the centre of the discretionary exercise under Order I Rule 10(2) CPC.

Why This Case Is Important

Vidur Impex v. Tosh Apartments is one of the leading authorities on applications for impleadment by subsequent purchasers.

The case is particularly important because it prevents a person from using a later transaction to acquire procedural advantages in pending litigation.

The Supreme Court recognised that a purchaser can sometimes be a proper party, but this depends upon the circumstances. The law does not treat every transferee pendente lite identically.

The case also demonstrates the importance of equitable conduct in the exercise of procedural discretion. A party seeking the court’s discretionary relief must approach the court with proper conduct and cannot rely upon a transaction that was deliberately entered into in breach of an existing judicial order.

Practical Application

Suppose A enters into an agreement with B for the purchase of a property and files a suit for specific performance after B refuses to complete the sale.

During the suit, B sells the property to C.

If C had no knowledge of the litigation, acted bona fide and promptly approaches the court after discovering the pending proceedings, the court may consider C’s impleadment.

But if C knew about the suit and deliberately purchased the property despite an injunction restraining B from alienating it, C’s position is very different.

Following Vidur Impex, the court may refuse to implead C because C’s conduct is not bona fide and the transaction itself was entered into in violation of the court’s order.

Law Student and Judiciary Relevance

For examinations, remember this sequence:

Order I Rule 10(2) CPC → Necessary / Proper Party → Transferee Pendente Lite → Judicial Discretion → Conduct of Purchaser.

The most important examination proposition is:

Subsequent purchaser does not have an absolute right to impleadment.

Remember the four circumstances which can justify refusal:

Contumacious conduct + Clandestine transaction + Violation of injunction + Undue delay.

Another useful distinction is:

Bona fide purchaser → Impleadment may be allowed.

Purchaser benefiting from a transaction in violation of injunction → Impleadment may be refused.

ALSO READ: Thomson Press (India) Ltd. v. Nanak Builders & Investors Pvt. Ltd.

Key Takeaways

Concept	Principle
Order I Rule 10(2) CPC	Gives the court discretionary power to add necessary or proper parties.
Necessary Party	A person without whom an effective decree cannot be passed.
Proper Party	A person whose presence enables complete and effective adjudication.
Transferee Pendente Lite	Has no absolute right to be impleaded.
Bona Fide Purchaser	May be impleaded where conduct is above board and the application is made within reasonable time.
Clandestine Transaction	Can justify refusal of impleadment.
Violation of Injunction	Strong ground for refusing discretionary relief.
Undue Delay	May defeat an application for impleadment.
Section 52 TPA	Protects the rights of parties during pending litigation through the doctrine of lis pendens.
Judicial Discretion	Must be exercised according to the circumstances and conduct of the parties.

Conclusion

Vidur Impex & Traders Pvt. Ltd. v. Tosh Apartments Pvt. Ltd. establishes that impleadment of a subsequent purchaser is not an automatic consequence of acquiring an interest in property during litigation.

The court must examine whether the purchaser is a necessary or proper party and, where specific performance is involved, must also consider the purchaser’s conduct.

A purchaser who acts bona fide and approaches the court promptly may be impleaded. However, a purchaser who knowingly participates in a clandestine transaction, violates an injunction order or unduly delays approaching the court cannot ordinarily expect the court to exercise its discretionary power in their favour.

The central lesson is simple: a subsequent purchaser may have an interest in the property, but the right to be impleaded depends upon both the nature of that interest and the conduct through which the interest was acquired.