P L D 2003 Supreme Court 818

P L D 2003 Supreme Court 818

Present: Nazim Hussain Siddiqui and Sardar Muhammad Raza, JJ

FAZAL KARIM through Legal Heirs and others ---Appellants

Versus

MUHAMMAD AFZAL through Legal Heirs and others---Respondents

Civil Appeal No. 1325 of 1997, decided on 26th May, 2003.

(On appeal from the judgment dated 2-5-1993 of the Lahore High Court, Lahore in R.S.A. No.237 of 1985).

(a) Transfer of Property Act (IV of 1882)---

----S. 52---Constitution of Pakistan (1973), Art. 185(3)---Transfer of property pending suit relating thereto---Leave to appeal was granted by the Supreme Court to consider as to whether the Courts of first and second appeal were justified in law to set aside the sale by applying S.52, Transfer of Property Act, 1882.

(b) Transfer of Property Act (IV of 1882)---

----S. 52---Principle of lis pendens---Applicability---Provision of S.52, Transfer of Property Act, 1882 laid down a pre-condition for the applicability of principle of lis pendens, that the proceedings during which the transaction took place were not collusive in nature---Principle of lis pendens, therefore, would be applicable in the absence of collusiveness--­Courts, at times, were confronted with fraudulent proceedings where the term "fraudulent" appeared to be a close associate of the term "collusion".

(c) Transfer of Property Act (IV of 1882)---

----S. 52---"Collusive" and "fraudulent" proceedings---Distinction---Cases which were collusive at the very inception and the cases where decree was obtained by collusion or fraud---Section 52 of the Transfer of Property Act, 1882 would not be applicable regardless of the tact, in the latter case, that the proceedings were initiated with honesty---Principles.

Collusion in judicial proceedings is a secret arrangement between two persons where one institutes a suit against the other in order to obtain a judicial decision for some sinister purpose. In such case the claim is fictitious, the contest is unreal and the decree passed therein is a mere mask having the similitude of a judicial determination, with the object of confounding the third party. In a fraudulent proceeding, the claim is untrue but the verdict of Court is managed to be obtained by practising fraud on the Court. 

At times the judicial proceedings do not commence with collusion or fraud but subsequently the parties resort to collusion as well as fraud in order to jeopardize the right or interest of a third party. The proceedings may not be collusive from the very inception but collusion, if resorted to subsequently, is as good a collusion as that intended from the very beginning. 

A decree passed in pursuance of a compromise does not exclude the application of section 52 of the Transfer of Property Act provided that such compromise is not tainted with fraud or collusion. A genuine compromise is a normal conduct of the parties and is not taken to be collusive but a compromise entered into by collusion or fraud excludes the application of section 52 of the Transfer of Property Act. It is altogether immaterial as to whether the proceedings were collusive from the very inception or they became so at some subsequent stage. A suit may be collusive even at its very inception or a decree may be obtained by collusion in a suit which had initially started bona fide. 

In cases which are collusive at the very inception and the cases where decree is obtained by collusion or fraud, section 52 of the Transfer of Property Act would not be applicable regardless of the fact, in the latter case, that the proceedings were initiated with honesty. 

Naqubai Animal v. B. Shama Rao AIR 1956 SC 593 and Periamurugapaa Asari v. Manicka Chetty AIR 1926 Mad. 50 ref.

(d) Transfer of Property Act (IV of 1882)--

----S. 52---Civil Procedure Code (V of 1908), O.XX, R.18---Partition suit--­Every party to a suit becomes a plaintiff in a matter of preliminary decree in general and in a suit for partition in particular---When each party after preliminary decree had become a plaintiff, no one could abandon his share and could surrender the entire one in favour of any other of the parties allowing him to become sole owner, in the absence of, the other co-sharers who equally were plaintiffs and from whom it was never enquired as to whether they accepted one of the co-sharers to be declared as sole owner of the disputed property---Very surrender by two co-sharers in favour of one co-sharer accepting the latter to be the sole owner of the property, in the absence of other co-sharers, was an act void ab initio, collusive as well as fraudulent.  

(e) Civil Procedure Code (V of 1908)---

----O. XXIII, R.1---Deletion of names of co-sharers of the property in dispute from the memorandum of appeal by the First Appellate Court--­Validity---Party after the institution of a suit though was at liberty to withdraw his suit or abandon part of his claim under O.XXIII, R.1, C.P.C against all or any o£ the defendants, yet even if such principle was applied to the appeals, the Court could not permit one of several plaintiffs to withdraw without consent of the others.  

(f) Transfer of Property Act (IV of 1882)---

----S. 52---Civil Procedure Code (V of 1908), O.XXIII, R.1---Partition suit--­Co-sharers of the suit property, in the present case, having been granted a preliminary decree in a suit for partition were one of the several plaintiffs who could not withdraw their claim at appeal stage without consent of the others but they had not only withdrawn from their claim but had agreed to the fact that one of the co-sharers was the sole owner---Validity---Disposal of appeal, in circumstances, was collusive as well as fraudulent, jeopardizing not only the interest of the vendees but also that of other co-sharers. 

(g) Transfer of Property Act (IV of 1882)---

---S. 52---Lis pendens, principle of ---Applicability---Vendee of a sale hit by the principle of lis pendens could be impleaded as party to the suit or appeal, as the case may be. 

(h) Transfer of Property Act (IV of 1882)---

----S. 52---Scope and application of S.52, Transfer of Property Act, 1882--­Lis pendens, principle of---Applicability---Scope---Lis pendens transaction was not void on the score that it was done during the pendency of some lis but the fate thereof would remain suspended till final verdict of the Court which was seized of the matter---Court was not to discard a transaction merely because the same had taken place during the pendency of the lis but its fate should be deferred to the final verdict as lis pendeny merely operated as a status quo ---Lis pendens transaction was not bad even if it had taken place during the existence of a status quo order by the Court and in such case it could, of course, entail any punitive action contemplated by O.XXXIX, C.P.C. but would not nullify the transaction between the parties on account of being lis pendens; the validity or otherwise whereof shall remain subject to final verdict by the Court---Principles.

On the one hand, section 52, Transfer of Property Act, 1882 deals with a transaction having taken place during proceedings which are not collusive and, on the other, it lays down that such transaction is not void due to being lis pendens and is always subject to any decree or order which ma, be made therein. Its validity remains subject to the authority of the Court which may be made on such terms as it may impose.

A close perusal of the section would clearly indicate that a lis pendens transaction is not void on this score alone that it was done during the pendency of some lis but the fate thereof would remain suspended till final verdict of the Court which is seized of the matter. Similar situation had come before this Court in Muhammad Zafar uz Zaman v. Faqir Muhammad (PLD 2001 SC 449), where this Court had held that vesting of title through a lis pendens transaction is not prevented by section 52 of the Transfer of Property Act, 1882 but the only impediment laid down by the section is that the validity of such transaction, keeping in view the rights of third parties, shall always be subject to the final decision by the Court. A lis pendens transaction is perfectly valid so far as the parties to such transaction are concerned but the effect thereof on a third party is kept pending till the decision of the 'suit or proceedings. The Courts should not discard a transaction merely because it had taken place during the pendency of a lis but its fate should be deferred to the final verdict. It merely operates as a status quo. Such transaction is not bad even if it takes place during the existence of a status quo order by the Court. In such case it can, of course, entail any punitive action contemplated by Order XXXIX of the C.P.C but would not nullify the transaction between the parties on account of being lis pendens; the validity or otherwise whereof shall remain subject to final verdict by the Court. The Courts below and determined that the transaction in hand was hit by section 52 of the Transfer of Property Act because this could always have been determined by the Court which was seized of the matter and which had failed to give any such verdict due to collusive and fraudulent disposal of appeal. 

Muhammad Zafar-uz-Zaman v. Faqir Muhammad PLD 2001 SC 449 ref.

(i) Registration Act (XVI of 1908)---

----S. 47---Time from which registered document operates---Registered document shall operate from the time from which the same would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration. 

Aamer Raza A. Khan, Senior Advocate Supreme Court and M. Islam, Advocate-on-Record (absent) for Appellants.

Amir Alam Khan, Advocate Supreme Court and M.A. Qureshi, Advocate-on-Record (absent) for Legal Heirs of Respondent No. 1.

Date of hearing: 9^th April, 2003.

JUDGMENT

SARDAR MUHAMMAD RAZA, J.---This appeal, after leave of Court, has been filed against the judgment dated 2-5-1993 rendered by a learned Single Judge of Lahore High Court, dismissing Regular Second Appeal No.237 of 1985, filed by the present appellants.

2. The chequered history of this litigation had started from 1971. The following pedigree-table would help comprehend the background, rather conveniently.

Sher Muhammad                                                                         |                                                                         | --------|-------------------------|----------------------|-------------------------|-------------------             |                                     |                                 |                                   |         (Son)                              (Son)                          (Son)                       (Daughter)    Muhammad                    Muhammad     Muhammad                  Mst. Iqbal        Shafi                               Sharif                           Afzal                          Begum           |           | --------|------------------------| |                                   |     Mst. Iqbal                 Abdur Rehman    Begum (widow)                  (son)

On 29-7-1971 Muhammad Shafi son of Sher Muhammad brought a suit for partition of 2/7 share against his co-heirs claiming that the disputed property having been allotted to their father by Deputy Settlement Commissioner, Sialkot on 31-10-1960 and the allottee father having died on 15-9-1961, his legal heirs having owned and possessed the property jointly, he intended to get his 2/7 share partitioned.

3. The suit was contested by Muhammad Afzal alone claiming himself to be the sole owner of the property. A preliminary decree for possession of 2/7 share through partition was granted by learned Civil Judge First Class, Sialkot on 26-6-1976. Muhammad Afzal went in appeal before the District Court, during the pendency whereof, three developments took place. Firstly, Muhammad Shafi died succeeded by his widow also named Mst. Iqbal Begum and son Abdur Rehman. Abdur Rehman and Mst. Iqbal begum through a registered agreement to sell dated 1-10-1979 (Exh.D-2) agreed to sell his share in favour of Fazal Karim and Mazhar Shah. Subsequently, Abdur Rehman and Mst. Iqbal Begum, the legal heirs of Muhammad Shafi, executed a sale-deed in favour of the aforesaid vendees on 30-12-1979, which after some contest on the point was registered on 23-8-1981.

4. The second development was to the effect that after executing registered agreement to sell dated 1-10-1979 and a sale-deed dated 30-12-1979, Abdur Rehman and Mst. Iqbal Begum, the respondents in the appeal aforesaid, allegedly entered into compromise with Muhammad Afzal and gave a statement that the appeal aforesaid be decided in favour of Muhammad Afzal. The thing to be noted was that the date of hearing in the appeal was fixed as 12-4-1981 but an application was submitted on 7-4-1981 for early fixation of appeal and disposal thereof there and then according to the statements/compromise mentioned above. The third development was that Muhammad Sharif and. Mst. Iqbal Begum, another brother and a sister who were a party to the appeal, were not only never given notice of such appeal/hearing but their names were deleted from the appeal unilaterally.

5. Now that 2/7 share of Abdur Rehman and his mother Mst. Iqbal Begum had stood transferred in the name of Fazal Karim and Mazhar Shah through a registered sale-deed dated 23-8-1981, Muhammad Afzal, on 25-8-1981 only two days thereafter brought a suit against the vendors and the vendees aforesaid without making Muhammad Sharif his brother and Mst. Iqbal Begum--his sister a party to the suit. It may be clarified here that the daughter of Sher Muhammad and the wife of Muhammad Shafi happened to be namesake. Muhammad Afzal was non-suited by the trial Court on 11-2-1985 on the grounds, inter alia, that Muhammad Sharif etc. were not made a party and that the compromise, in the circumstances, also could not be entered into.

6. Muhammad Afzal went in appeal before the First Appellate Court which was accepted, he was declared full owner of the property, the sale deed registered on 23-8-1981 was declared void and application of Muhammad Sharif etc. for impleadment was also rejected. Fazal Karim etc. the vendees filed a Regular Second Appeal before the High Court which also was dismissed through the impugned judgment dated 2-5-1993, holding that the sale flowing from registered agreement to sell dated 1-10-1979, sale-deed dated 30-12-1979 registered on 23-8-1981 was hit by the principle of lis pendens and hence was ineffective under section 52 of the Transfer of Property Act. Both, Fazal Karim and Mazhar Shah are dead. Their legal heirs have filed the instant appeal where leave was granted to consider as to whether the Courts of first and second appeal were justified in law to set aside the sale by applying section 52 of the Transfer of Property Act.

7. To avoid consulting the text time and again, section 52 of the Transfer of Property Act, for sake of convenience, is reproduced below:

52. Transfer of property pending suit relating thereto. ---During the pendency in any Court having authority in Pakistan or established beyond the limits of Pakistan by the Central Government of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

Explanation.---For the purpose of this section, the pendency of a suit or proceedings shall be deemed to commence from tike date of, the presentation of the plaint or the institution of the proceedings in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.

8. Mr. Aamer Raza A. Khan, learned counsel for the appellants while relying on -numerous old and new verdicts of different superior Courts argued that section 52 of the Transfer of Property Act was absolutely inapplicable because the pendency of appeal during which the sale in dispute took place, was a collusive proceeding because the vendors in collusion with Muhammad Afzal (appellant therein) who at the back of Muhammad Sharif and Mst. Iqbal Begum had not only entered into compromise but dishonestly got them deleted from the memorandum of appeal without any notice and five days earlier, on 7-4-1981, than the actual date of hearing on 12-4-1981.

9. Learned counsel for the respondents Mr. Amir Alam Khan relied upon the judgment of the High Court and claimed that the sale in dispute was squarely hit by the principle of lis pendens as envisaged by section 52 ibid.

10. Section 52 of the Transfer of Property Act lays down a precondition for the applicability of principle of lis pendens, that, the proceedings during which the transaction took place were collusive in nature. In the absence of collusiveness, the principle of lis pendens would not apply. At tithes we are confronted with fraudulent proceedings where the term 'fraudulent' appears to be a close associate of the term 'collusion'.

11. Collusion in judicial proceedings is a secret arrangement between two persons where one institutes a suit against the other in order to obtain a judicial decision for some sinister purpose. In such case the claim is fictitious, the contest is unreal and the decree passed therein is a mere mask having the similitude of a judicial determination, with the object of confounding the third party. In a fraudulent proceeding, the claim is untrue but the verdict of Court is managed to be obtained by practising fraud on the Court. We have gone through this distinction laid down by Venkatarama Ayyar, J. in a Full Bench judgment of Indian Supreme Court in Nagubai Animal v. B. Shama Rao (AIR 1956 SC 593).

12. We are also confronted with another phenomenon that at times the judicial proceedings do not commence with collusion or fraud but subsequently the parties resort to collusion as well as fraud in order to jeopardize the right or interest of a third party. The proceedings may not be collusive from the very inception but collusion, if resorted to subsequently, is as good a collusion as that intended from the very beginning. In Periamurugappa Asari v. Manicka Chetty AIR 1926 Madras 50, Venkatasubba Rao, J. observed, also with reference to a compromise, that decree passed in pursuance of a compromise does not exclude the application of section 52 provided that such compromise is not tainted with fraud or collusion. A genuine compromise is a normal conduct of the parties and is not taken to be collusive but a compromise entered into by collusion or fraud excludes the application of section 52 of the Transfer of Property Act. It is altogether immaterial as to whether the proceedings were collusive from the very inception or they became so at some subsequent stage. A suit may be collusive even at its very inception or a decree may be obtained by collusion in a suit which had initially started bona fide.

13. We, therefore, hold that in cases which are collusive at the very inception and the cases where decree is obtained by collusion or fraud, section 52 of the Transfer of Property Act would not be applicable regardless of the fact, in the latter case, that the proceedings were initiated with honesty.

14. While keeping the above determination in view, we propose to take up the matter in sequence. It is evident from record that Muhammad Shat3 was granted a preliminary decree for possession of 2/7 share on 26-6-1976 against which Muhammad Afzal filed an appeal. In a matter of preliminary decree in general and that in a suit for partition in particular, every party to a suit becomes a plaintiff. When Muhammad Shaft was granted preliminary decree of 2/7 share, his two brothers equally became co-sharers to the extent of 2/7 share and his sister to the extent of 1/7 share with similar right to get their share partitioned irrespective of the fact as to whether each of the defendants was specified his share or it was left joint as 5/7. In this view of the matter, when each party after preliminary decree had become a plaintiff, no one could abandon his share and could surrender the entire one in favour of any other of the parties allowing him to become sole owner, in the absence of the other co-sharers who equally were plaintiffs and from whom it was never inquired as to whether they accepted Muhammad Afzal to be declared as sole owner of the disputed property. The very surrender by Abdur Rehman and his mother Mst. Iqbal Begum in favour of Muhammad Afzal accepting the latter to be the sole owner of the property, in the absence of Muhammad Sharif and Mst. Iqbal Begum the daughter of Sher Muhammad was an act void ab initio, collusive as well as fraudulent.

15. Mst. Iqbal Begum and Abdur Rehman the sots and widow, respectively, of Muhammad Shafi have conducted in a manner which was not at all above board. They have been hunting with the hunter and running with the rabbit by selling property to Fazal Karim and Mazhar Shah on the one hand and by surrendering the same in favour of Muhammad Afzal, on the other. The collusion among them is strongly evident from the fact that all the mala fide proceedings were taken up by them on 7-4-1981 when the actual date of hearing was 12-4-1981. No difference at all would have been made had they entered into compromise only five days thereafter and on the fixed date of hearing when the other two parties would also have been present in Court.

16. A serious mistake has been committed by the First Appellate Court as well when it deleted the names of Muhammad Sharif and Mst. Iqbal Begum from the Memorandum of Appeal. No doubt, under Order XXIII, Rule 1, C.P.C. a party at any time after the institution of a suit is at liberty to withdraw his suit or abandon part of his claim against all or any of the defendants yet, even if the principle is applied to the appeals, the Court cannot permit one of several plaintiffs to withdraw without consent of others. As already held, Abdur Rehman and Mst. Iqbal Begum having been granted a preliminary decree in a suit for partition were certainly one of the several plaintiffs who could not withdraw from their claim without the consent of others. Here, they had not only withdrawn from their claim but had agreed to the fact that Muhammad Afzal was the sole owner. We, therefore, have no hesitation in holding that the disposal of appeal before Additional District Judge, Sialkot on 7-4-1981 was collusive as well as fraudulent, jeopardizing not only the interest of the vendees but also that of their brother and sister, namely, Muhammad Sharif and Mst. Iqbal Begum.

17. No doubt, the registered agreement to sell dated 1-10-1979 and the subsequent sale-deed dated 30-12-1979 had taken place during the pendency of appeal yet the future complications and confusions could have been avoided through the impleadment of Fazal Karim and Mazhar Shah in the appeal. There is no harm at all if a vendee of a sale hit, if at all, by the principle of lis pendens, is impleaded as party to the suit or appeal, as the case may be.

18. We now revert to another important aspect of section 52 of the Transfer of Property Act. On the one hand, it deals with a transaction having taken place during proceedings which are not collusive and, on the other, it lays down that such transaction is not void due to being lis pendens and is always subject to any decree or order which may be made therein. Its validity remains subject to the authority of the Court which may be made on such terms as it may impose. (Underlining is improvised).

19. A close perusal of the section would clearly indicate that a lis pendens transaction is not void on this score alone that it was done during the pendency of some lis but the fate thereof would remain suspended till final verdict of the Court which is seized of the matter. Similar situation had come before this Court in Muhammad Zafar uz Zaman v. Faqir Muhammad (PLD 2001 SC 449), where this Court had held that vesting of title through a lis pendens transaction is not prevented by section 52 of the T.P. Act but the only impediment laid down by the section is that the validity of such transaction, keeping in view the rights of third parties, shall always be subject to the final decision by the Court. A lis pendens transaction is perfectly valid so far as the parties to such transaction are concerned but the effect thereof on a third party is kept pending till the decision of the suit or proceedings. In this view of the matter, the Courts should .not discard a transaction merely because it had taken place during the pendency of a lis but its fate should be deferred to the final verdict. It merely operates as a status quo. Such transaction is not bad even if it takes place during the existence or a status quo order by the Court. In such case it can, of course, entail any punitive action contemplated by Order XXXIX of the C.P.C. but would not nullify the transaction between the parties on account of being lis pendens; the validity or otherwise whereof shall remain subject to final verdict by the Court. The Courts below and the learned High Court have therefore wrongly determined that the transaction in hand was hit by section 52 of the Transfer of Property Act because this could always have been determined by the Court which was seized of the matter and which had failed to give any such verdict due to collusive and fraudulent disposal of appeal.

20. The transaction had initiated from a registered agreement to sell dated 1-10-1979 while sale-deed was executed on 30-12-1979. Such deed was registered on 23-8-1981 while the proceedings before the First Appellate Court ended on 7-4-1981 due to the compromise discussed above. A confusion might arise at any stage that the transaction became effective on 23-8-1981 due to the attestation thereof by the Sub-Registrar, while, the lis was not pending at that time, having been disposed of on 7-4-1981. This idea is nagated by section 47 of the Registration Act which clearly lays down that a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration. In this legal aspect of the matter the transaction in hand, if genuine otherwise, would be deemed to be operative with effect from 30-12-1979, if not 1-10-1979.

21. All that has been discussed and determined qua the sale in question is purely in connection with section 52 of the Transfer of Property Act and section 47 of the Registration Act. We have not dilated upon the merits of the transaction qua the rights of a third party because that was to be determined by the First Appellate Court in which the proceedings were collusively concluded. For what we propose to do, the matter is left to be finally adjudicated upon by the competent Court.

22. Consequently the appeal is accepted the impugned judgment dated 2-5-1993 of the learned High Court is set aside along with the decree dated 7-4-1981 passed by the learned Additional District Judge, Sialkot in Civil Appeal No.178 of 1978 (Muhammad Afzal v. Abdur Rehman etc.). The aforesaid appeal is hereby stored with direction that Muhammad Sharif and Mst. Iqbal Begum the original parties thereto, shall be restored as parties while the legal heirs of Fazal Karim and Mazhar Shah, the vendees of disputed transaction, shall be impleaded therein and thereafter the appeal shall be decided in the presence of and after hearing all the parties, in accordance with law. This shall be on payment of Rs.15,000 (Rupees fifteen thousand only) as costs by Muhammad Afzal and Rs.10.000 (Rupees ten thousand only) as costs by Abdur Rehman and Mst. Iqbal Begum to the present appellants, within ten days of commencement of proceedings before Additional District Judge, Sialkot failing which the transaction of sale in question would be deemed as genuine. The parties to appear before the Additional District Judge, Sialkot on 26-6-2003.

M.B.A./F-108/S                                                                                  Appeal accepted.