Subsequent Purchasers Not Bonafide If Sales Executed Hastily After Failed Mediation: Delhi High Court Orders Deposit Of Sale Proceeds In Property Dispute Between Mother & Son

Delhi High Court, in a significant ruling dated July 6, 2026, held that a prima facie case for interim injunction is made out when a seller executes sale deeds pendente lite in a hurried manner immediately following the failure of mediation proceedings.

A bench of Justice Amit Bansal observed that such transactions, especially when the original title deeds remain with the prior agreement holder, create serious doubts regarding the bona fide nature of the subsequent purchasers.

The dispute involves two suits for specific performance concerning properties in Greater Kailash-I and II. Romi Garg (Plaintiff) alleged that his mother, Sheela Devi, entered into an Agreement to Sell (ATS) in May 2023 for a total consideration of Rs. 24.50 Crores, of which he had already paid approximately 94.5%. While the suit was pending and the parties were engaged in mediation, Sheela Devi sold portions of the property to KIOSK Properties and Bhilai Engineering on September 1, 2025, without informing the Court.

The primary question before the court was whether the plaintiffs had established a prima facie case for interim injunction despite the defendants' allegations that the underlying Agreements to Sell were forged. The court was also called upon to determine whether the subsequent purchasers could be regarded as bona fide transferees for value without notice under the Transfer of Property Act, 1882.

Prima Facie Validity of the Agreement to Sell

The Court noted that while the defendants challenged the Agreement to Sell (ATS) dated May 15, 2023, as forged, the signatures of Sheela Devi on the document appeared similar to those on the subsequent sale deeds. The bench emphasized that the veracity of forgery allegations can only be tested during the trial. However, for interim purposes, the Court found the document credible, particularly since Romi Garg’s father had filed an affidavit identifying the signatures as those of his wife.

Court Finds Plaintiff Paid Substantial Consideration

The bench observed that Romi Garg had demonstrated his readiness and willingness to perform his part of the contract. The records indicated that he had paid approximately Rs. 23.16 Crores out of the total Rs. 24.50 Crores consideration. The Court remarked that the handing over of original title deeds to the plaintiff further supported the existence of a valid transaction.

"The plaintiffs have the resources and have always been ready and willing to pay the balance amount due."

Inconsistencies in Subsequent Sale Deeds

The Court expressed strong displeasure over the fact that Sheela Devi executed sale deeds in favor of third parties while the matter was sub-judice. The bench highlighted several inconsistencies in these deeds, such as the false claim that the property was free from encumbrances. The Court noted that the subsequent purchasers were aware of the ongoing litigation as they were in communication with the parties during the mediation phase.

Hasty Execution After Mediation Failure Raises Doubts

The bench found it "unusual" that the sale deeds were executed on September 1, 2025, merely a week after mediation talks failed. This haste, combined with the non-disclosure of the sales to the Court during hearings held on September 10, 2025, suggested an attempt to defeat the plaintiffs' rights and overreach judicial proceedings.

"Clearly, Bhilai Engineering was aware of the legal proceedings and hence is not a bona fide purchaser."

Possession of Original Title Deeds and Bank Loans

The Court questioned the credibility of the subsequent purchasers' claims of obtaining bank loans for the purchase. The bench noted that it is difficult to believe a bank would grant a housing loan without examining original title deeds, which were admittedly in Romi Garg’s possession. The loan sanction letters were also found to be dated subsequent to the filing of the first suit.

Protection of Interests via Deposit of Sale Consideration

To balance the equities and secure the interests of all parties, the Court determined that the sale proceeds received by Sheela Devi from the third-party purchasers must be preserved. Since she had effectively received consideration twice for the same property—once from her son and once from the subsequent purchasers—the Court found it necessary to direct the deposit of the latter amount.

"In these circumstances, to secure the interests of the plaintiffs and the subsequent purchasers, the balance of convenience requires that Sheela Devi be asked to deposit sum of Rs.20,50,00,000/-."

The Court concluded that the pendente lite sale deeds would be subject to the rights of the plaintiffs under the earlier Agreements to Sell. Consequently, the bench ordered a status quo on the title and possession of the suit properties. Sheela Devi was directed to deposit the Rs. 20.50 Crore consideration received from the subsequent purchasers into the Court's registry within four weeks to be placed in an interest-bearing account.

Date of Decision: 06 July 2026