Transfers Made During Ongoing Litigation Are Destined To Fail: Supreme Court Invokes Doctrine of Lis Pendens To Nullify Collusive Sale Deeds

In a decisive ruling reiterating the supremacy of the doctrine of lis pendens, the Supreme Court struck down sale deeds executed during the pendency of a specific performance suit, declaring them legally void and unenforceable. The Court observed, “Sale deeds executed during pendency of litigation are hit by Section 52 of the Transfer of Property Act, 1882 and are a nullity in law.”

The case arose from an Agreement to Sell executed in 2001, under which Krishan Gopal agreed to sell agricultural land to Gurmeet Kaur and her two sons. While the suit for specific performance was pending, Krishan Gopal clandestinely sold the same land to a third party, Arun Kalia, who in turn resold the land to others.

Criticising the mala fide conduct, the Bench comprising Justice Sanjay Kumar and Justice K.V. Viswanathan observed that “the conduct of Krishan Gopal and his so-called tenant Arun Kalia smacks of collusion and fraud.” The Court held that the entire chain of transactions was void, explaining, “As the sale deeds were admittedly executed after the institution of the suit, they are hit by Section 52 of the Transfer of Property Act and do not confer any legal title.”

The Court pointed out that the seller, Krishan Gopal, suppressed these transactions during the trial, never informing the court about executing the sale deeds during litigation. This deliberate concealment, the Court noted, further vitiated the transactions. “The subsequent transfers are not only illegal but a blatant attempt to defeat the court’s authority and subvert justice,” the Court held.

Relying on settled law, the Court clarified that “the doctrine of lis pendens is rooted in equity and public policy—it prevents parties from transferring disputed property during litigation so as to protect the integrity of the judicial process.”

Despite contentions by the third parties that they were bona fide purchasers, the Court dismissed their claims, stating unequivocally, “Transferees pendente lite acquire no better title than what is held by their transferor and are bound by the outcome of the litigation.”

Highlighting its power under Section 31(2) of the Specific Relief Act, 1963, the Court directed the Sub-Registrar to cancel the fraudulent sale deeds, reinforcing that fraudulent parties cannot benefit from illegal transfers. “The Registry shall communicate this order to the Sub-Registrar for appropriate rectification of land records,” the judgment commanded.

The Supreme Court also invoked its equitable jurisdiction to balance interests by awarding an additional ₹25,00,000 to the seller over and above the original sale consideration. However, it made it abundantly clear that such equity cannot legitimize unlawful transfers. “The Court’s power to balance equities cannot extend to shielding fraudulent transactions; lis pendens is an inviolable protection against such manipulations,” the Court declared.

This judgment serves as a categorical assertion that courts will not tolerate transactions which aim to bypass pending litigation and that any such transfers made in defiance of judicial proceedings will be treated as a nullity.

Concluding, the Supreme Court warned, “Any person acquiring property during litigation does so at their own peril.”

Date of Decision: 15th July 2025a