In Property Dispute, Suit Parties Must File Encumbrance Certificate To Avoid Multiple Proceedings And Ease Future Litigation: Andhra Pradesh HC

While hearing a property dispute case, the Andhra Pradesh High Court emphasized on the value of encumbrance certificates observing that to avoid multiplicity of proceedings, the parties should file the encumbrance certificate along with the plaint, which can also help ease future litigation. The high court said that while allowing a revision plea, moved by the plaintiff against an order of the trial court which had dismissed her application to bring on record subsequent purchasers of the property in question. The court however imposed cost of Rs. 25,000 on the plaintiff while noting that she had filed the application at the fag end of the suit and there were laches on her part. For context, an encumbrance certificate helps ascertain whether a property is free of any outstanding liabilities. The court thus emphasized that the plaintiff while initiating a suit needs to be diligent in finding out who is the owner of the property at the filing of the suit.Justice Subba Reddy Satti in its order said, "A necessary party ought to be joined as a party to the suit, and in whose absence, an effective decree cannot be passed by the Court. A proper party is a person whose presence would enable the Court to completely, effectively and properly adjudicate upon all matters and issues, though he may not be a person in favour of or against whom a decree is to be made...Normally in a suit for the specific performance of a contract, the contracting parties alone are proper and necessary. The Court will not adjudicate third-party rights. However, in cases of the one on hand, even the purchaser of the property from the same vendor is a necessary party. By arranging the purchaser, after the agreement of sale, valuable judicial time can be saved. In fact, such a step is not difficult if one verifies the encumbrance certificate, which will reflect all the registered transactions. The importance of arranging the subsequent purchaser as a party defendant is discussed...If proper parties are shown, looking at the encumbrance certificate, the time spent in interlocutory applications can be avoided be it pending the suit or after the decree. This procedure may also inspire confidence in the general public. 'Let the litigant not miss faith in the system”. On Encumbrance certificatesThe high court said that encumbrance certificate sometimes "plays a vital role" and indicates the "bona fides of the parties" with respect to the efforts put in by them regarding verifying the information, particularly in the context of Section 3 of The Transfer of Property Act, which deals with constructive notice of certain things as to registered transactions. "Of course, the Courts, normally at the numbering stage may not insist on filing of encumbrance certificate. The duty is not confined to the Court. Every stakeholder must be fair and dutiful towards the judicial institution. When a litigant is expecting relief from the judicial system, he/she/it is supposed to be diligent. One who is not diligent cannot claim that he is bona fide. A person, before, initiating litigation does not care to verify antecedents of the property viz., the subject matter of the litigation, by making reasonable and possible enquiries which one could easily make, he/she cannot subsequently blame anybody. The principles of fairness, good conscience, and equity, demand that one must be fair to the Court," the court observed. It further said that a party filing a suit for specific performance, if verified by obtaining an Encumbrance Certificate as to right being intact with his vendor, can easily know if any other person is having interest and if such interest is after the interest of the plaintiff (the person initiating litigation). In such a case, the court said, even the subsequent purchaser can be added and the subsequent purchaser becomes not merely a proper "but a necessary party" to the litigation. "The Encumbrance Certificate may not disclose everything, may not be totally reliable, and may have its defects. However, the Encumbrance Certificate would indicate at least fairness and bona fides on the part of the stakeholders concerned if obtained, verified and enclosed with his plaint. Such exercise is advisable with the changing trends in civil litigation and the same will avoid delays...To avoid the multiplicity of the proceedings, the parties should file the encumbrance certificate along with the plaint, which will ease future litigation," it added. BackgroundThe revisionist before the high court had filed a suit before the trial court seeking specific performance of a 2015 agreement of sale against the sole defendant for a property valued at Rs. 19,30,000.At the time of the agreement of sale, the plaintiff paid Rs.2,00,000 as advance and the balance sale consideration had to be paid on or before December 2015. The defendant approached the plaintiff and requested to arrange some sale consideration amount and the plaintiff paid Rs.2,50,000/-...

In Property Dispute, Suit Parties Must File Encumbrance Certificate To Avoid Multiple Proceedings And Ease Future Litigation: Andhra Pradesh HC

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