Long-term possession by a bonafide subsequent purchaser justifies discretionary refusal of specific performance.

The Plaintiff (Kanchan Rohira) entered into a registered agreement for sale dated January 9, 1977, with Defendant No. 1 (Nirman Constructions) to purchase a flat for Rs. 26,000, paying an advance of Rs. 10,500

Possession was due by May 30, 1977, but was delayed due to internal management disputes within Defendant No. 1

On September 30, 1981, Defendant No. 1 terminated the agreement alleging non-payment

Defendant No. 1 subsequently sold the flat to Defendant No. 3 in 1981, who then sold it to Defendant No. 4 (Suresh Dhoot) on May 12, 1986, for Rs. 1,40,000

The Trial Court held that the Plaintiff was ready and willing, the termination was illegal, and Defendant No. 4 was not a bonafide purchaser as he had constructive notice of the registered agreement

However, the Trial Court denied specific performance under Section 20 of the Specific Relief Act due to Defendant No. 4’s long-standing possession since 1986, instead awarding the Plaintiff damages of Rs. 1,52,250 and a refund of the advance

Both the Plaintiff and Defendant No. 4 appealed

1. Whether the Plaintiff proved readiness and willingness to perform her contractual obligations

2. Whether the notice of termination dated September 30, 1981, was illegal and bad in law

3. Whether Defendant No. 4 was a transferee for value in good faith without notice of the original contract under Section 19(b) of the Specific Relief Act

4. Whether a respondent can challenge adverse findings without filing a formal memorandum of cross-objection

5. Whether the court properly exercised its discretion under Section 20 of the Specific Relief Act to deny specific performance while granting damages

The Court applied Section 16(c) of the Specific Relief Act, 1963, regarding readiness and willingness

Section 19(b) concerning relief against subsequent purchasers with notice

It relied on Section 3 of the Transfer of Property Act, 1882, specifically the proviso to Explanation I, which stipulates that constructive notice via registration requires proof that the instrument was duly entered in books under Section 51 and indexed under Section 55 of the Registration Act

The Court followed Ravinder Kumar Sharma v. State of Assam, establishing that a respondent may attack adverse findings to sustain a decree without filing cross-objections

Finally, it applied the discretionary principles under Section 20 of the Specific Relief Act (pre-2018 amendment), as elucidated in Sardar Singh v. Krishna Devi, holding that the court is not bound to grant specific performance merely because it is lawful

The Court affirmed that the Plaintiff was ready and willing, noting that the delay in payment was excusable as the construction was incomplete and the vendor was embroiled in internal litigation

Regarding the "bonafide purchaser" status, the Court set aside the Trial Judge’s finding of constructive notice. It reasoned that under the proviso to Section 3 of the Transfer of Property Act, mere registration does not constitute notice unless the Plaintiff proves that the document was correctly entered in the specific registers and indexes maintained under Sections 51 and 55 of the Registration Act; as the Plaintiff failed to lead such evidence, Defendant No. 4 could not be imputed with constructive notice

The Court also held that Defendant No. 4, having paid valuable consideration and occupied the flat since 1986, was a protected transferee

On the issue of discretion, the Court held that while the Plaintiff succeeded on the legality of the contract, the lapse of 40 years and the continuous possession of Defendant No. 4 made the grant of specific performance inequitable

The Court clarified that Section 20(1) grants broad discretionary powers not limited to the specific illustrations of hardship in Section 20(2)

(i) the Plaintiff was ready and willing; (ii) the termination was illegal; (iii) Defendant No. 4 was a bonafide purchaser for value without notice because the technical requirements for constructive notice were not met; and (iv) the denial of specific performance in favor of damages was a proper exercise of judicial discretion given the equities of long-term possession

The Plaintiff is entitled to the awarded damages of Rs. 1,52,250 plus a refund of Rs. 10,500 with interest