After Land Sale During Injunction, Karnataka HC Keeps ₹7.5-Crore Compensation Deposit Order For Now, Directs Trial Court To Reassess Security In 8 Weeks

Respondent No. 1 filed a 2012 suit for specific performance based on an agreement of sale dated 5 October 2007. An injunction restraining the vendors from alienating the suit property was in force when the petitioner, defendant No. 16, purchased it by registered sale deed dated 26 March 2022. The property was later acquired, and the petitioner received ₹7.5 crore in compensation.

The plaintiff sought an order under Section 151 CPC requiring the petitioner to deposit that amount. The trial court allowed the application and directed deposit within 20 days.

The petitioner challenged that order under Articles 226 and 227, arguing, among other things, that the plaintiff had neither established entitlement under the agreement nor pleaded a claim for compensation under Section 21 of the Specific Relief Act. The High Court noted that the plaintiff had not amended the plaint to claim compensation.

Section 21(5) of the Specific Relief Act bars an award of compensation unless it is claimed in the plaint, while its proviso permits amendment to include such a claim on just terms; acquisition during the suit may make specific performance impossible but does not itself establish the plaintiff’s entitlement to compensation.

Under Section 54 of the Transfer of Property Act, an agreement for sale does not itself create an interest in the property; Section 52 makes a pendente lite transfer subject to the outcome of the litigation, and a transfer made in breach of an injunction cannot be allowed to defeat the court’s process.

Section 151 CPC may support protective directions to preserve the effectiveness of proceedings, but it cannot be used to grant substantive relief in advance or to bypass the safeguards governing pre-judgment security; Raman Tech. & Process Engg. Co. v. Solanki Traders was relied on for that restraint.

The principle in Delhi Development Authority v. Skipper Construction Co. (P) Ltd. supports appropriate remedial measures to prevent a party from retaining an advantage obtained by defeating a court order, but does not automatically entitle the plaintiff to the fund.

The High Court held that the plaintiff had no established right to the acquisition compensation: the agreement’s enforceability and the plaintiff’s entitlement remained for trial, and no Section 21 compensation claim had been pleaded. The acquisition award could not simply be treated as belonging to the plaintiff because it concerned the same property.

However, the petitioner acquired the property while an express injunction against alienation was in force, and the subsequent acquisition had replaced the property with an identifiable fund. That circumstance distinguished the application from an ordinary request to secure an unadjudicated money claim and justified considering preservation to protect the court’s process.

Because ordering the entire amount to be deposited indefinitely could go beyond necessary protection, the trial court was directed to reconsider the extent and continuation of security, taking account of the absent compensation claim, any steps to amend the plaint, the potential claim, and alternative security.

The trial court must reconsider the extent and continuation of security within eight weeks after hearing the parties; any amount already deposited is to remain in a fixed deposit in a nationalised bank pending that decision. The trial court may maintain, vary, or vacate the security by a reasoned order and must decide the suit independently and expeditiously.