The Supreme Court of India, in its recent judgment, ruled that a pendente lite transferee (a person who purchases a suit property during ongoing litigation) does not have an automatic right to be impleaded in the suit. The ruling clarifies that such a transferee can only be allowed to participate under exceptional circumstances when their rights are directly affected.

The bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan laid down eight key principles to govern such cases. The judgment overturns the Karnataka High Court’s decision that granted leave to appeal to pendente lite transferees.

Background of the Case

The case arose when two respondents, who purchased a property during the pendency of a suit for specific performance, sought to be impleaded. The trial court dismissed their application for impleadment, and this decision attained finality. However, the High Court of Karnataka later allowed them to appeal against the decree, leading the original plaintiff to challenge the High Court’s decision in the Supreme Court.

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Key Principles Laid Down by the Supreme Court

The Supreme Court summarized the principles regarding impleadment of pendente lite transferees as follows:

1. Case-Specific Decision: A transferee pendente lite can be impleaded based on the facts and circumstances of the case under Order I Rule 10 or Order XXII Rule 10 of the Code of Civil Procedure (CPC).
2. No Automatic Right: A transferee pendente lite does not have an absolute right to be added as a party
3. Court’s Discretion: The decision to implead such a transferee is based on judicial discretion, considering the nature of the suit.
4. Binding Effect of Judgment: Even if a transferee pendente lite is not impleaded, they remain bound by the final judgment.
5. Legal Consequences: If a transferee does not seek impleadment, they risk the suit being conducted without their representation.
6. Impact of Transfer of Property Act: Transfers made during ongoing litigation are subject to Section 52 of the Transfer of Property Act, 1882.
7. Effect of Unchallenged Orders: If an impleadment application is rejected and not appealed, it attains finality, and the transferee cannot later seek to be impleaded.
8. Right to Appeal: A transferee pendente lite can seek leave to appeal only if they can establish that they are directly and adversely affected by the decree.

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The Supreme Court observed that Respondents No. 1 and 2 purchased the suit property despite a court injunction against its transfer. Additionally, their impleadment application was previously dismissed and never challenged, meaning the issue had already attained finality.

The High Court’s decision to allow them to appeal was therefore erroneous. The Supreme Court ruled:

“Having regard to the fact that Respondents Nos. 1 and 2 purchased the suit property during the pendency of the suit and while an injunction against the original owner was operating, they have not made out a case for leave to appeal.”

Further, the court clarified that a pendente lite transferee cannot challenge the judgment simply on the grounds of being cheated or misled by the seller. If they were deceived, they could seek legal remedies separately.

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Legal Provisions Discussed

1. Section 52 of the Transfer of Property Act, 1882
   • This section establishes that any property transfer made while a legal dispute is pending is subject to the final outcome of the case.
2. Order I Rule 10 CPC
   • Allows impleadment of necessary and proper parties in a suit.
3. Order XXII Rule 10 CPC
   • Allows a person who acquires interest in a property during litigation to seek permission to continue the suit in their name.
4. Section 146 CPC
   • Enables persons claiming under another party to be impleaded in proceedings.

Implications of the Judgment

1. Protection of Legal Proceedings: This ruling reinforces that property transactions during litigation must be approached cautiously
2. Limited Rights for Pendente Lite Transferees: Purchasers must ensure due diligence before buying disputed properties.
   
3. Finality of Court Orders: Once an impleadment application is rejected, it cannot be challenged later unless there is a clear adverse impact.
4. Encourages Due Diligence: Buyers must verify pending legal disputes before purchasing properties to avoid complications.
   

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The Supreme Court’s ruling reinforces the principle that a pendente lite transferee has no automatic right to be impleaded in a suit. The decision highlights that judicial discretion must be exercised while considering such applications and that legal remedies for cheated buyers exist outside the suit.

This judgment serves as a significant precedent, emphasizing the importance of respecting legal restrictions on property transactions during litigation.