HN NARAYANASWAMY NAIDU V. DEVEERAMMA, AIR 1981 KANT 93
FACTS
A son and his mother sold the house to B. It was a conditional sale, with a stipulation that if within a period of six and a half years, the seller would pay the entire consideration to B; B would reconvey the property back to them.
A little later, however, for a consideration, the seller agreed to release this right of conveyance on favour of B, with the help of an unregistered agreement. B took possession of the properties and after the execution of release deed, carried major repairs at his costs.
The sellers (mother and son) however, sold the right of reconveyance stipulated under the original sale deed to a person D, without disclosing to him, that it has already been released in favour of the buyer B.
D, claiming to be a bona fide purchaser of the reconveyance rights without notice wanted to enforce the same.
HELD
The court held that, since B was in actual possession of the property, D had a duty to direct his inquiries to B with respect to B’s rights over the property.
Having failed to do that, he would be imputed with constructive notice of the release deed executed by the sellers in favour of B.