While Section 52 TP Act Doesn’t Void Pendente Lite Transfers, Court Can Invalidate Such Sales Using Contempt Powers: Supreme Court
The Supreme Court, in Celir LLP v. Sumati Prasad Bafna & Ors., ruled that courts can declare a sale transaction void under contempt jurisdiction if it violates judicial directions, even though such transactions during ongoing litigation (pendente lite) are not automatically void under Section 52 of the Transfer of Property Act (TPA).
A bench of Justices JB Pardiwala and Manoj Misra addressed a contempt petition filed by Celir LLP, the auction purchaser of a property under the SARFAESI Act. The borrower had executed an assignment deed transferring the secured asset to a third party despite the Supreme Court's judgment affirming the auction sale of the same property.
Key highlights of the ruling include:
1. Lis Pendens Doctrine: The Court reaffirmed that the doctrine applies from the moment proceedings are initiated, rendering subsequent transfers subject to litigation outcomes. Even without a registered notice of pendency (as required by the Maharashtra amendment to Section 52 TPA), a transferee cannot claim absolute title.
2. Contempt Jurisdiction: The Court emphasized that contempt extends beyond explicit disobedience of orders. Actions aimed at frustrating judicial proceedings or circumventing decisions undermine judicial authority and constitute contempt.
3. Effect of Contempt: While Section 52 does not automatically invalidate transfers, courts may declare such transactions void under contempt jurisdiction to prevent the contemnor from benefiting from their wrongful conduct.
4. Broad Principle: Respect for judicial authority extends to the spirit of court proceedings, not merely compliance with explicit orders. Attempts to obstruct the administration of justice or thwart court decisions threaten the rule of law.
Although the borrower and subsequent transferee attempted to obstruct the judgment's implementation, the Court refrained from holding them in contempt, granting them an opportunity to comply. The Court ultimately declared the transfer invalid and passed appropriate orders to enforce its judgment.