A significant clarification has emerged on the enforceability of consent terms against third parties holding registered Property Agreement for Sale and Agreement (PAAA). The Bombay High Court has affirmed that such agreements cannot bind individuals who were never parties to the litigation in which the consent terms were recorded, reinforcing the foundational principle that rights under a PAAA are independent and must be adjudicated in a proper forum.
Background & Facts
The Dispute
The applicant, Aijaz Abdul Kader Perfumewala, holds a registered Property Agreement for Sale and Agreement (PAAA) with the developer for two residential units - Nos. 101 and 102 - in a re-development project. The defendants, Mithila Developers and others, were engaged in a separate commercial suit concerning the same project. In that suit, the parties executed consent terms that included Clause 6, purporting to determine the rights of the applicant over the very units covered by his PAAA.
Procedural History
- The applicant was not named as a party in Commercial Suit No. 119 of 2025.
- Consent terms were recorded by the court in that suit, with Clause 6 directly affecting the applicant’s claimed rights.
- The applicant filed an interim application seeking to set aside Clause 6, arguing it violated his statutory rights under the PAAA.
- The court examined whether such an interim application was maintainable given the applicant’s non-party status.
Relief Sought
The applicant sought to declare Clause 6 of the consent terms void as against him, and to restrain the defendants from enforcing it. He contended that his rights under the registered PAAA were independent and could not be adjudicated or extinguished in a proceeding to which he was not a party.
The Legal Issue
The central question was whether Clause 6 of consent terms in a suit, binding only the litigating parties, can lawfully extinguish or alter the rights of a third party who holds a registered PAAA over the same property, without affording that third party an opportunity to be heard.
Arguments Presented
For the Petitioner
The applicant relied on Triloki Nath Singh v. Anirudh Singh to argue that a person with a registered PAAA possesses a substantive, enforceable right in the property, independent of any litigation between others. He contended that consent terms cannot operate as res judicata against a non-party, and that Clause 6 violated his right to due process under Article 21. He further emphasized that the PAAA was duly registered under the Registration Act, 1908, and thus conferred a legal interest that could not be overridden by private agreement in unrelated proceedings.
For the Respondent
The defendants argued that the consent terms were a legitimate settlement between the parties to the suit, and that the applicant’s rights, if any, were subordinate to the redevelopment arrangement. They claimed that the applicant had constructive notice of the suit and should have intervened. They further suggested that the applicant’s remedy lay in challenging the validity of the PAAA itself, not in seeking to set aside consent terms in a suit he was not part of.
The Court's Analysis
The Court examined the nature of a registered PAAA and its legal effect under the Transfer of Property Act, 1882, and the Registration Act, 1908. It held that a registered PAAA creates a contractual right that is enforceable against the world, not merely the contracting party. The Court emphasized that consent terms are binding only on the parties who voluntarily submit to them.
"There is no bar on Applicant to file an appropriate Suit for protection of Applicant's right, title and interest in the subject property under the PAAA which is claimed by Applicant."
The Court distinguished between adjudication of rights among litigants and the protection of third-party interests. It noted that Clause 6, by purporting to determine the applicant’s rights without his participation, amounted to an impermissible collateral attack on his statutory claim. The Court further held that the applicant’s remedy was not to challenge the consent terms in an interim application, but to initiate a separate suit to enforce his PAAA rights. This approach preserved procedural fairness and respected the principle that no one shall be bound by a judgment to which they were not a party.
The Verdict
The applicant prevailed. The Court held that consent terms in a suit cannot bind a third party holding a registered PAAA, and that such rights must be adjudicated in a separate, appropriate suit. The interim application was dismissed, but the applicant was expressly permitted to file a suit to enforce his rights under the PAAA.
What This Means For Similar Cases
Third-Party PAAA Rights Are Independent
- Practitioners must advise clients holding registered PAAA to file separate suits if their rights are threatened by consent terms or settlements in unrelated litigation.
- Courts will not entertain applications to set aside consent terms as against non-parties; the proper remedy is a substantive suit.
Consent Terms Are Not Res Judicata Against Non-Parties
- A consent decree or term cannot operate as res judicata against someone who was neither a party nor represented in the original suit.
- Developers and litigants must ensure that third-party interests are formally impleaded before attempting to settle rights over the same property.
Registration Confers Enforceable Interest
- A registered PAAA is not merely a contract - it creates a legally recognized interest that must be respected in all subsequent proceedings.
- Practitioners should routinely verify PAAA registration status before advising clients on property settlements or redevelopment agreements.
