A Subsequent Court Auction Cannot Override a Prior Sale in Execution of a Specific Performance Decree: Madras High Court Sets Aside Executing Court’s Order

Madras High Court has ruled that a money decree holder cannot claim superior rights over a property that was already transferred under a specific performance decree, as such a sale is protected by the doctrine of lis pendens. Setting aside the Principal District Judge of Puducherry’s order in an execution petition, the High Court held that a subsequent auction sale in execution of a money decree does not override an earlier court-ordered transfer in a specific performance suit.

Delivering the judgment in Gunaseelan & Another v. P. Perumal & Others, Justice N. Sathish Kumar observed, "Once a property is subject to a specific performance decree, any subsequent sale arising from a money decree is hit by the doctrine of lis pendens. The law does not permit a later auction purchaser to override the rights of a prior decree holder."

By allowing the appeal, the High Court has reaffirmed that priority in judicially recognized transactions determines title, and property buyers through court auctions must ensure they are not purchasing encumbered assets.

A Conflict Between a Specific Performance Decree and a Money Decree Auction
The dispute arose from two parallel proceedings concerning the same property. The appellant, Gunaseelan, had filed a specific performance suit (O.S. No. 24 of 2013) to enforce an agreement of sale dated May 23, 2012. The suit was decreed ex parte in his favor on September 11, 2013, and he later obtained a sale deed through court execution on March 4, 2016.

Meanwhile, the first respondent, P. Perumal, had obtained a money decree in O.S. No. 32 of 2013 for ₹18,20,000 based on a promissory note dated February 12, 2012. The money decree led to an attachment of the property on June 19, 2013, followed by an auction sale in which Perumal himself was declared the successful bidder on March 21, 2016.

Both Gunaseelan and Perumal claimed title to the property, leading to a legal confrontation in execution proceedings. The Executing Court ruled in favor of the money decree holder, ordering the eviction of Gunaseelan, prompting him to challenge the decision before the High Court.

"A Validly Decreed Sale Cannot Be Undermined by a Later Attachment"
The High Court held that Gunaseelan’s title, derived from a specific performance decree, had priority over Perumal’s rights as an auction purchaser in a money decree.

Justice Sathish Kumar, analyzing the facts, observed: "A decree for specific performance enforces a pre-existing contract and is not merely an execution process. The subsequent attachment in the money suit cannot take precedence over a sale deed executed in favor of a specific performance decree holder."

Rejecting the argument that the money decree attachment in June 2013 nullified Gunaseelan’s rights, the Court ruled: "An attachment does not create a title but merely restricts the alienation of a property. A sale following a specific performance decree operates independently of subsequent money decree proceedings."

The High Court relied on several Supreme Court judgments to emphasize that lis pendens applies even to involuntary sales such as court auctions.

Citing Samarendra Nath Sinha v. Krishna Kumar Nag (AIR 1967 SC 1440), the Court reaffirmed that: "While Section 52 of the Transfer of Property Act does not directly apply to involuntary alienations like auction sales, the principle of lis pendens ensures that a transferee in a pending litigation is bound by the outcome of the suit."

Referring to Kedar Nath Lal v. Ganesh Ram (1969) 2 SCC 787, the Court ruled that: "An attachment only prevents alienation but does not confer ownership. If a property is transferred pursuant to a decree, an auction purchaser in a later proceeding cannot claim a superior title."

Holding that Gunaseelan had a valid title under a prior specific performance decree, the High Court set aside the Executing Court’s decision to grant possession to the money decree holder.

Justice Sathish Kumar ruled: "The appellant’s title stands validated through a legally executed sale deed, while the respondent’s claim through a subsequent auction purchase cannot override the decree-backed transfer. The money decree execution cannot dislodge a transaction protected under lis pendens."

The Court restored Gunaseelan’s possession and barred Perumal from claiming ownership based on the money decree auction.
 A Crucial Clarification on Property Rights in Conflicting Court Sales
The Madras High Court’s ruling in Gunaseelan & Another v. P. Perumal & Others settles a critical question in property law, affirming that:

•    A property transferred under a specific performance decree takes precedence over subsequent money decree attachments.
•    Auction purchases in execution of money decrees do not override judicially decreed sales.
•    Lis pendens applies even to court sales, ensuring continuity of rights for prior decree holders.
Justice Sathish Kumar, in his concluding remarks, stated: "Legal certainty in property transactions requires that court-ordered transfers retain their legitimacy. Allowing a subsequent auction purchaser to override an earlier judicially sanctioned sale would destabilize the doctrine of lis pendens and invite litigation chaos."

With this ruling, the Madras High Court has reinforced property rights in competing judicial sales, ensuring that title disputes are resolved on the basis of priority and legality rather than procedural technicalities.
 

Date of Decision: 14 March 2025