A) ABSTRACT / HEADNOTE

The Supreme Court in Lala Durga Prasad and Another v. Lala Deep Chand and Others, [1954] SCR 360, clarified critical doctrines related to specific performance in real estate contracts where a subsequent purchaser has intervened. The core dispute stemmed from the existence and enforceability of a prior agreement to sell immovable property, and the legal impact of a later transaction executed by the vendor in favour of a third party. The Court upheld that even if disputes arise post-contract concerning the form of warranties or covenants, the fundamental agreement remains unaffected provided the readiness and willingness to perform the contract persists. The judgment also sets down the proper form of decree in cases involving specific performance against a vendor and a subsequent purchaser with notice of a prior contract. The case serves as a crucial precedent in shaping the remedy of specific performance under Indian law and delineates the equitable treatment of parties in cases of conflicting sale interests. Importantly, it distinguishes the liability and obligations of subsequent purchasers and defines the contours of judicial discretion in ordering conveyance and monetary compensation to balance equities.

Keywords: Specific Performance, Sale of Land, Subsequent Purchaser, Equitable Relief, Conveyance, Readiness and Willingness, Indian Trusts Act, Specific Relief Act.

B) CASE DETAILS

i) Judgement Cause Title
Lala Durga Prasad and Another v. Lala Deep Chand and Others

ii) Case Number
Civil Appeal No. 86 of 1950

iii) Judgement Date
November 18, 1953

iv) Court
Supreme Court of India

v) Quorum
B.K. Mukherjea J., Vivian Bose J., N.H. Bhagwati J.

vi) Author
Justice Vivian Bose

vii) Citation
[1954] SCR 360

viii) Legal Provisions Involved
Section 91 of the Indian Trusts Act, 1882
Section 3 (Illustration g) and Section 27 of the Specific Relief Act, 1877
Section 40 of the Transfer of Property Act, 1882

ix) Judgments Overruled by the Case (if any)
None overruled directly, but the Court clarified and distinguished Bindeshri Prasad v. Mahant Jairam Gir, ILR 9 All. 705.

x) Case is Related to which Law Subjects
Property Law, Civil Law, Contract Law, Specific Relief, Equity Jurisprudence.

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute in Lala Durga Prasad v. Lala Deep Chand revolved around the enforceability of an agreement for sale dated 7 February 1942, between the plaintiff (Lala Durga Prasad) and the vendor (the Nawab). Subsequently, the Nawab executed a sale deed on 4 April 1942 in favour of the appellants (Deep Chand and another), leading to a legal conflict over rights to the property. The appellants claimed their purchase was bona fide and for value. The central issue was whether the earlier agreement constituted a concluded contract entitling the plaintiff to a decree of specific performance. The case involved the intersection of contract enforcement and third-party rights under equitable doctrines and statutory frameworks such as the Trusts Act and Specific Relief Act. A critical concern was the appropriate form of decree where title had passed to a subsequent transferee.

D) FACTS OF THE CASE

The plaintiff alleged that the Nawab agreed to sell immovable property for ₹62,000 and accepted ₹10,000 as earnest money on 7 February 1942. The Nawab later sold the same property to the appellants for ₹72,000 on 4 April 1942. The plaintiff filed a suit seeking specific performance. The trial court dismissed the suit, finding no concluded contract. On appeal, a split decision in the High Court led to a Full Bench ruling in favour of the plaintiff, recognizing a completed contract. The defendants appealed to the Supreme Court.

Importantly, the Nawab’s receipt for ₹10,000 (Ex. 35-G) expressly stated it was part of a concluded agreement and mentioned the three-month execution clause. No explicit repudiation was evident. Though later correspondence involved disputes over a warranty clause in the draft sale deed, the plaintiff maintained readiness and willingness to perform the contract. The appellants, on their part, argued they were bona fide purchasers without notice, though evidence indicated otherwise. The Nawab’s estate was later vested in the Custodian, U.P., due to his migration to Pakistan, complicating the enforcement.

E) LEGAL ISSUES RAISED

i) Whether the agreement dated 7 February 1942 constituted a concluded contract enforceable by specific performance.
ii) Whether disputes concerning a clause in the draft sale deed amounted to a repudiation of contract.
iii) Whether the subsequent purchaser (with alleged notice) could defeat the plaintiff’s equitable right to specific performance.
iv) What form the decree should take in such a situation where title had already passed to a third party.
v) Whether the court could grant equitable monetary relief and direct refund or part refund to the subsequent purchaser.

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that
The plaintiff’s contract was not concluded. The receipt was merely an expression of intent and not a binding agreement. The appellants emphasized misrepresentation and fraud by the plaintiff’s agent, who allegedly misinformed the Nawab that the prior purchaser (the appellants) had withdrawn. They asserted the lack of consensus ad idem. They further contended that there was no proper warranty agreement, and subsequent insistence upon it indicated that terms were unsettled. They also argued that they were bona fide purchasers for value without notice, and hence protected under Section 27(b) of the Specific Relief Act, 1877. Additionally, they challenged the plaintiff’s entitlement to specific performance on the ground of laches and delay.

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that
The agreement of 7 February 1942 was unequivocally concluded, supported by the receipt acknowledging earnest payment and intent to execute the sale within three months. The language in the receipt was definite, and the Nawab’s own pleadings admitted the transaction, alleging only that it was induced by fraud. The subsequent disputes over the form of warranty were raised after the contract was concluded and could not undo the agreement. Moreover, the appellants had constructive or actual notice of the earlier contract and hence could not claim immunity as bona fide purchasers. They argued that the relief of specific performance was equitable, and the plaintiff had consistently shown readiness and willingness, as evidenced by his letter dated 22 April 1942 and his conduct in court proceedings.

H) RELATED LEGAL PROVISIONS

i) Section 91 of the Indian Trusts Act, 1882
Obligation in the nature of trust imposed on transferee with notice of prior contract.

ii) Section 3 (Illustration g) and Section 27 of the Specific Relief Act, 1877
Specific performance may be enforced against subsequent purchasers except bona fide purchasers for value without notice.

iii) Section 40 of the Transfer of Property Act, 1882
Restrictive covenants enforceable against subsequent transferees with notice.

iv) Relevant Doctrines and Principles
Doctrine of Notice
Doctrine of Specific Performance
Doctrine of Constructive Trust
Doctrine of Equitable Remedies

I) JUDGEMENT

a. RATIO DECIDENDI

i) The Court held that the receipt dated 7 February 1942 constituted a binding and enforceable contract. The plaintiff successfully discharged the burden of proof. The alleged fraud was not substantiated. The Court clarified that post-contract disputes about warranty did not negate the completeness of the contract. Readiness and willingness to perform the contract remained intact. The plaintiff had an equitable right of specific performance, enforceable against a subsequent purchaser with notice, under Section 91 of the Indian Trusts Act, 1882 and Section 27 of the Specific Relief Act, 1877. The appropriate form of decree was to compel both vendor and the subsequent transferee to join in the conveyance—the vendor for covenants, and the transferee for title.

b. OBITER DICTA 

i) The Court observed that not every monetary dispute or drafting disagreement could be construed as a repudiation. Also, not every form of equitable relief entitles a party to disturb existing legal relationships unless equities justify such disturbance. The court emphasized that insistence on a particular form of warranty in sale deed preparation could, in some circumstances, disentitle a party from specific performance, but only if it amounted to an outright refusal to perform the contract.

c. GUIDELINES 

i) In a suit for specific performance against vendor and subsequent purchaser:

• The Court must direct execution of conveyance by both.

• The subsequent purchaser is not liable for vendor’s personal covenants.

• Decree may allow equitable refund to the subsequent purchaser where considerations justify.

• Readiness and willingness to perform remain critical factors.

• The transferee must join only to the extent of transferring title.

J) CONCLUSION & COMMENTS

This judgment sets a definitive precedent for enforcement of specific performance where a subsequent purchaser intervenes. The Supreme Court not only clarified the form of decree, but also addressed issues of equity, notice, and bona fides. Importantly, the Court balanced contractual sanctity with equitable restitution, avoiding unjust enrichment by the vendor’s estate. It stressed the need for clarity in pleadings and discouraged vague or evasive defenses. By compelling the subsequent transferee to join the conveyance without binding him to original covenants, the Court preserved fairness. The judgment is a cornerstone in property jurisprudence, emphasizing form, equity, and clarity in contract enforcement.

K) REFERENCES

a. Important Cases Referred

1. Bindeshri Prasad v. Mahant Jairam Gir, ILR 9 All. 705

2. Kafiladdin v. Samiraddin, AIR 1931 Cal 67

3. Potter v. Sanders, (67 ER 1057)

4. Kali Charan v. Janak Deo, AIR 1932 All 694

b. Important Statutes Referred

1. Indian Trusts Act, 1882 – Section 91

2. Specific Relief Act, 1877 – Section 3(g), Section 27

3. Transfer of Property Act, 1882 – Section 40