What is the Doctrine of Bona Fide Purchaser?

 

Recently, the Hon’ble Supreme Court in the case of Kaushik Premkumar Mishra & Another v. Kanji Ravaria & Another, 2024 SCC OnLine SC 1756, discussed the Doctrine of Bona Fide Purchaser and the extent of protection that it offers to innocent property buyers. But before moving further, it would be profitable to understand the general meaning of Bona Fide Purchaser. Black’s Law Dictionary defines ‘Bona Fide Purchaser’ as: -

 

“One who buys something for value without notice of another’s claim to the property and without actual or constructive notice of any defects in or infirmities, claims or equities against the seller’s title.”

 

Thus, an innocent person who purchases a property having a reasonable belief that the property is free from defects could be termed as a bona fide purchaser. According to the Hon’ble Supreme Court, the Doctrine of Bona Fide Purchaser applies in situations where the seller appears to have “some semblance of legitimate ownership rights.”

 

Further, the Court observed that: -

 

“However, this principle does not protect a subsequent purchaser if the vendor had already transferred those rights through a prior sale deed. In a case where the vendor deceitfully executes a second sale deed 26 years after the initial transfer, without disclosing the earlier transaction and without any ongoing litigation regarding the property, the subsequent purchaser cannot claim the benefits of a bona fide purchaser. Essentially, if the vendor's rights were already severed by the first sale, any later sale deed made without transparency and in bad faith is invalid. The subsequent purchaser, even if unaware of the prior sale, cannot be considered bona fide because the vendor no longer had the legal right to sell the property. Thus, the protection afforded by the bona fide purchaser doctrine is nullified by the vendor's deceitful conduct and the pre-existing transfer of rights. This ensures that the original purchaser's rights are upheld and prevents unjust enrichment through fraudulent transactions.”

 

From a bare perusal of the abovementioned excerpt, following important points could be culled out: -

 

1. If a seller has a defective title or had already passed on the property to somebody else, then the Doctrine of Bona Fide Purchaser does not offer protection to a subsequent buyer who buys the same property.

 

2. If a subsequent purchaser is unaware of the prior sale, then such subsequent purchaser could not be termed as a Bona Fide Purchaser because the seller from whom he purchased the property had no legal right to sell the same.

 

3. Pre-existing transfer of rights ensures that the original purchaser’s rights are intact and any unjust enrichment of the seller through a subsequent fraudulent sale is prevented.

 

Thus, while purchasing any property, the buyers must conduct proper and thorough due diligence of the same. Looking into land settlement records, enquiring in the registrar’s office and carefully studying the sale deed are some of the basic steps that every buyer of a property must undertake. If without taking these steps, a buyer blindly trusts the seller, then later on, the buyer cannot expect protection from the court if there has already been a prior sale. Basically, the Doctrine of Bona Fide Purchaser would come into picture only when the seller has proper title over the property. If that is not the case, then the very root of the sale transaction would come under question.