The National Consumer Disputes Redressal Commission has reaffirmed that the doctrine of lis pendens under Section 52 of the Transfer of Property Act, 1882, bars any transfer of property during the pendency of litigation, even when the transferee acts in good faith. This ruling clarifies that a builder’s attempt to re-allot flats to third parties after a consumer complaint is filed but before final adjudication cannot override the decree holder’s vested right to possession.
Background & Facts
The Dispute
The dispute arose from two consumer complaints filed before the National Consumer Disputes Redressal Commission (NCDRC) by Madhulekha Sawhney (CC/89/2017) and Ranji Bhandari & Anr. (CC/3689/2017) against M/s Shipra Estate Ltd. and Jai Krishna Estate Developers Pvt. Ltd. (the Builder), and Ghaziabad Development Authority (GDA). The complainants were allottees of flats in the Shipra Krishna project at Ahinsa Khand, Indirapuram, Ghaziabad. They paid booking amounts and subsequent instalments as per the allotment letters issued on 07.04.2007 (Flat No. Gulmohar-1301) and 09.04.2007 (Flat No. Gulmohar-1302). The Builder failed to deliver possession within the stipulated time, prompting the complainants to file complaints alleging deficiency in service.
Key Facts
- The complainants paid instalments regularly until May 2008 (CC/89/2017) and January 2008 (CC/3689/2017).
- The Builder alleged that the complainants defaulted on payments after July 2008 and accrued interest on delayed payments.
- The Builder revised payment schedules on 13.03.2009, 14.01.2012, and other dates, adjusting delay compensation against outstanding dues.
- Construction was completed by October 2014.
- Possession was offered to the complainants via letter dated 11.01.2016, but they did not pay the balance amount.
- The Builder claimed financial difficulties due to contractor defaults and market downturn, resulting in Rs. 32 crores in unpaid dues from other allottees.
- GDA’s role was limited to executing sub-lease deeds upon the Builder’s direction, as per the Memorandum of Understanding dated 08.01.2001.
Procedural History
- 29.05.2023: NCDRC passed order partly allowing complaints. Directed complainants to deposit balance amount within one month; upon deposit, Builder to execute conveyance deed and hand over possession within six weeks. If complainants failed to deposit, Builder could cancel allotment and refund amount with 9% interest after deducting 10% of basic sale price.
- 01.08.2023: Review applications filed by complainants dismissed by NCDRC.
- 11.09.2023: Civil Appeals filed before Supreme Court dismissed.
- 03.10.2023: Misc. Applications before Supreme Court seeking extension of time withdrawn with liberty to approach NCDRC.
- 20.12.2023: NCDRC allowed MA No. 511/2023 and MA No. 512/2023, extending time for deposit by 30 days (deadline: 19.01.2024).
- 28.12.2023: Complainants offered payment via email.
- 29.12.2023: Builder refused to accept payment, advising complainants to pursue statutory remedies.
- 14.09.2023: Builder cancelled allotments of complainants and re-allotted Flat No. Gulmohar-1301 to Shubham Tyagi and Shivam Tyagi (via Memorandum of Allotment dated 27.09.2023 and Buyer Agreement dated 18.10.2023).
- 14.09.2023: Builder re-allotted Flat No. Gulmohar-1302 to Anju Rani Agarwal and Shruti Agarwal.
- 20.01.2024: Physical possession handed over to interveners.
- 19.01.2024: NCDRC permitted complainants to deposit balance amount with its Registry.
- 22.01.2024: Complainants deposited balance amount with NCDRC Registry.
- 02.09.2025: Supreme Court dismissed SLPs filed by Builder and granted liberty to interveners to file applications before NCDRC.
- 08.04.2026: NCDRC passed order on execution petitions and intervention applications.
The Parties' Positions
Complainants/Decree Holders: Argued they had fully complied with the extended timeline by depositing the balance amount with the NCDRC Registry. They contended that the Builder’s refusal to accept payment was a deliberate act to frustrate the decree. They sought enforcement of possession and conveyance deed.
Builder/Judgment Debtor: Argued that the complainants failed to deposit the amount within the original and extended deadlines. Cancellation of allotment on 14.09.2023 was lawful under the terms of the NCDRC order. The re-allotments to interveners were valid and in good faith.
Interveners (Shubham Tyagi, Shivam Tyagi, Anju Rani Agarwal, Shruti Agarwal): Claimed to be bona fide purchasers who paid full consideration, secured bank loans, received possession, and were unaware of the litigation until GDA refused registration. They sought registration of sale deeds.
Relief Sought
Decree Holders: Enforcement of NCDRC order dated 29.05.2023; issuance of conveyance deed; unconditional physical possession of flats; attachment or arrest of Builder’s partner if non-compliant.
Interveners: Recognition of their title; execution of sale deeds in their favour; or alternatively, refund of consideration with interest.
The Legal Issue
The central questions were: (1) Whether a decree holder who is obligated to pay a balance amount can invoke execution proceedings under Section 25(3) of the Consumer Protection Act, 1986; (2) Whether cancellation of allotment during pendency of statutory appeals and before the extended deadline is valid; and (3) Whether third-party allotments made during the pendency of litigation are protected under the doctrine of lis pendens.
Arguments Presented
For the Appellant/Petitioner
The decree holders argued that their deposit of the balance amount with the NCDRC Registry on 22.01.2024 constituted full compliance with the extended timeline under Order dated 20.12.2023. They relied on the principle that an executing court may facilitate compliance when the judgment debtor refuses to accept tendered payment. They cited Maneka Gandhi v. Union of India to emphasize that procedural fairness must prevail over technicalities. They contended that the Builder’s refusal to accept payment was an act of bad faith, and the cancellation of allotment was premature and invalid.
For the Respondent/State
The Builder argued that the decree holders were not entitled to receive any amount under the order, but were obligated to pay, and therefore lacked locus standi to file execution petitions under Section 25(3). They relied on Pradeep Mehra v. Harijivan J. Jethwa & Ors., Meenakshi Saxena v. ECGC Ltd., and Sanwarlal Agrawal & Ors. v. Ashok Kumar Kothari & Ors. to assert that an executing court cannot alter the terms of a decree. They maintained that the cancellation on 14.09.2023 was lawful, as the complainants had defaulted on multiple deadlines and failed to challenge the demand notices. They further argued that the interveners were bona fide purchasers who had no notice of the litigation.
The Court's Analysis
The Commission rejected the Builder’s hyper-technical argument that execution petitions are maintainable only by persons entitled to receive money. It held that the order dated 29.05.2023 was a hybrid decree imposing reciprocal obligations: payment by the complainant and conveyance by the Builder. The complainants’ right to possession was the substantive relief, and their deposit with the Registry was a valid mechanism to enforce it.
"The argument that the Decree Holders are not 'entitled to the amount' ignores the hybrid nature of the decree, which primarily awards specific performance (possession) upon the discharge of a reciprocal financial duty."
The Commission found the cancellation of allotment on 14.09.2023 to be legally untenable. It occurred just three days after the Supreme Court dismissed the Civil Appeals, while the complainants’ applications for extension were still pending before the Apex Court. The subsequent extension granted by the NCDRC on 20.12.2023 retroactively cured any procedural default. The Builder’s refusal to accept payment on 28.12.2023 was a deliberate act to frustrate the decree.
The Court then examined the doctrine of lis pendens under Section 52 of the Transfer of Property Act, 1882. It held that the litigation was pending from the date of filing of the consumer complaints in 2017, and the re-allotments to interveners in September 2023 occurred while the matter was still sub-judice before the Supreme Court and subsequently before the NCDRC. The interveners, despite acting in good faith, stepped into the shoes of the Builder and were bound by the outcome of the litigation.
"A party making a transfer during the pendency of litigation does so at their own peril, and the transferee (the Interveners) steps into the shoes of the transferor, bound by the final outcome of the litigation."
The Court emphasized that the interveners’ claim to specific performance could not override the crystallized decree in favour of the decree holders. However, the Builder’s conduct in re-allotting the flats while litigation was pending constituted fraud and unjust enrichment. The interveners were entitled to a refund of their consideration with interest as equitable relief.
The Verdict
The decree holders succeeded. The NCDRC allowed Execution Petitions No. 07/2024 and 10/2024. The Builder is directed to execute absolute conveyance deeds and hand over unconditional physical possession of Flat No. Gulmohar-1301 and Flat No. Gulmohar-1302 to Madhulekha Sawhney and Ranji Bhandari respectively within four weeks. The NCDRC Registry shall release the deposited balance amounts to the Builder only upon certification of possession and registration. The interveners’ prayer for registration of sale deeds is dismissed. They are directed to vacate the flats within two weeks. The Builder shall refund the entire sale consideration paid by the interveners with 9% interest per annum from the date of deposit until realization, within six weeks.
What This Means For Similar Cases
Lis Pendens Overrides Bona Fide Purchaser Claims
- Practitioners must advise clients that third-party purchases made during pending litigation are voidable, regardless of good faith or payment.
- The doctrine of lis pendens applies from the date of filing of the complaint, not from the date of interim orders.
- Buyers must conduct title searches and verify litigation status before entering into real estate transactions.
Execution Proceedings Are Maintainable for Specific Performance
- A decree holder obligated to pay a balance amount can invoke execution proceedings to enforce the reciprocal obligation of possession or conveyance.
- Courts may permit deposit of amounts with the registry when the judgment debtor refuses to accept tendered payment.
- Technical objections under Section 25(3) will not defeat substantive rights to specific performance.
Builders Cannot Exploit Litigation Gaps to Re-Allot
- Builders who re-allot units during pendency of consumer proceedings risk being held liable for fraud and unjust enrichment.
- Courts will award refunds with interest to innocent third parties, but will not grant possession if the original decree holder’s rights are superior.
- Delay in compliance by complainants does not automatically extinguish rights if statutory remedies are pending.
