Supreme General Films Exchange Ltd. v Maharaja Sir Brijnath Singhji Deo (1975)

Section 52 is easy to state and hard to apply. The hard question is always the same: was the transaction an enforcement of a pre-existing right, or the creation of a new right during the litigation? Only the second is caught. Supreme General Films is the Supreme Court's answer, and it is also the case that shows a compromise decree in a separate suit being used as a device — and being seen through.

The Bhatias, owners of the Sunder Vilas Theatre at Jabalpur (later Plaza Talkies), borrowed Rs 2,50,000 from the plaintiff, a maharaja, against a pledge of cotton bales. The pledged goods being insufficient, on 29 December 1951 they executed a registered mortgage of the theatre in his favour. He sued (Civil Suit 15A of 1954) and obtained a compromise decree on 7 May 1960 providing that the dues would be realised by sale of the theatre.

Separately, the Central Bank of India had obtained a decree for Rs 1,24,000 on 29 April 1952 in Civil Suit 3B of 1952; the rights under it were assigned to the plaintiff, and the theatre was attached on 4 May 1955 in its execution.

The appellant company had occupied the theatre under an unregistered lease of 27 February 1940, which expired on 10 April 1946, after which it held over. On 20 November 1954 it filed its own suit (16A of 1954) for specific performance of an agreement to lease said to be contained in a letter of 19 July 1948. That suit ended in a compromise decree on 24 March 1956 — in a suit to which the maharaja was not a party at all — and on 30 March 1956 the impugned lease deed was executed, purporting to give the company eight years from 10 February 1956 to 10 February 1964 with an option of renewal to 10 February 1970.

The plaintiff sued for a declaration that the 1956 lease was void and ineffective against his rights under the two decrees, and that an auction purchaser in execution would take free of it.

1. Was the lease of 30 March 1956 struck by s. 52, or was it merely the enforcement of an antecedent right arising from the 1948 agreement? 2. Does s. 65A(2)(e), which confines a mortgagor's power of leasing to three years, being a special provision, displace s. 52? 3. Did the suit lie at all, having regard to s. 42 of the Specific Relief Act 1877?

The appeal was dismissed with costs. The trial court and the High Court had rightly decreed the suit.

1. New rights, not the enforcement of old ones. The compromise decree in the specific performance suit and the lease deed of 1956 "purported to confer upon the defendant-appellant new rights". The Court went further: "there are good grounds for suspecting that the compromise in the suit for specific performance was adopted as a device to get round legal difficulties in the execution of the lease of 1956 in favour of the defendant company". Bishan Singh v Khazan Singh, cited for the proposition that the lease merely enforced a pre-existing right, did not help. The Court's conclusion is the ratio: "We think that it purported to create entirely new rights pendente lite. It was, therefore, struck by the doctrine of lis pendens, as explained by this Court in Jayaram Mudaliar v. lyyaswami" and, in the words that follow the citation, "embodied in Section 52 of the Transfer of Property Act".

(The respondent's name in Jayaram Mudaliar is sometimes misprinted; the citation is AIR 1973 SC 569.)

2. Section 65A does not oust section 52. The alternative argument — that the special provision limiting a mortgagor's leases to three years displaces the general doctrine — "overlooks the special objects of the doctrine of lis pendens which applies to a case in which litigation, relating to property in which rights are sought to be created pendente lite by acts of parties, is pending." Besides, the argument was self-defeating: if s. 65A(2)(e) did apply, the company's rights would have vanished before the suit was even filed. Since lis pendens applied, "the purported lease of 1956 was invalid from the outset", and the s. 65A point did not need to be decided.

Section 52 provides that during the pendency in any court of "any suit or proceedings which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the court and on such terms as it may impose."

The elements to run through in any problem:

1. A suit or proceeding pending in a competent court.
2. It is not collusive.
3. A right to immovable property is directly and specifically in question.
4. A party to it transfers or otherwise deals with the property.
5. The transfer would affect the rights of another party under the decree.
6. There was no leave of the court.

Note what s. 52 does not do. It does not make the transfer void as between transferor and transferee. It makes the transfer ineffective against the party who succeeds in the suit — the transferee takes subject to the result. The declaration sought and granted in this case was framed exactly that way: the lease was void and ineffective against the plaintiff's rights under the decrees, and an auction purchaser would take free of it.

A transaction executed during the pendency of a suit which creates entirely new rights in the property in dispute is hit by s. 52, and it is no answer that it was executed to carry out a compromise decree in another suit to which the opposite party was not a party. A special provision such as s. 65A(2)(e) does not displace the doctrine of lis pendens.