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Home > Articles > Property Law > Rights of the Bona fide Purchaser - A Case Study

Rights of the Bona fide Purchaser - A Case Study

By : Anand on 02 June 2011 Print thi
When one living person conveys property, in present or in future, to one or more other living
persons, or to himself (in different capacity) and one of more other living persons and to
himself; this act by the living person conveying property to other is termed as or defined as
Transfer of Property under the Indian Property Law.

In India procedures, methods, approval of transfer of property or conveyance of title

regarding immovable property is being governed by the Property Law that is the Transfer of
Property Act 1882 except chapter II of the Act from Sections 5 to 37, which governs both
movable and immovable property. The present paper here only deals with the immovable
property, thus there is a need to define immovable Property, which is also defined in Indian
Registration act .In the present paper, author has discussed about the Rights of the Bona fide
Purchaser. These Rights are not provided separately, anywhere in any legislation, but the act
of the legislator, in few sections of TP Act. has provided about the Rights of the Bona fide
purchaser under defective Title. TP Act. is a protection guard for the Bona fide Purchaser, in
all the sections, related with Bona fide Purchaser, such purchasers or the transferees are
protected by this act that is, their right is protected by the TP Act. and the same rights we
will discuss in the present paper. Also some exceptions are also given in the TP Act. which
doesnt provide for the protection of rights of a bona fide purchaser.

CONCEPT During a transfer of property, or conveyance of property by one person to another,
one who transfers the property is known as transferor and the one who purchases that
property or to whom the property is being transferred is known as the Purchaser or the
Transferee. In general term Bona fide is a Latin Term meaning In Good faith. Thus, a Bona
fide Person means the person having a good or sincere or an honest intention or belief. A
Bona fide Purchaser is a term used in the law of property to refer to an innocent party who
purchases property without notice of any other party's claim to the title of that property. He
is a person who purchases the property for value that is must pay for it or must give
considerations rather than simply be the beneficiary of a gift. Even when a party, fraudulently
conveys property to a bona fide purchaser, may be by any way that is by transferring or
selling to the bona fide purchaser property that has already been conveyed or transferred to
someone else, that bona fide purchaser will, get a valid title or a good title to the property
despite the competing claims of the other party. However, parties who are claiming for the
real ownership in the property will retain a cause of action (a right to sue) against the party
who made the fraudulent conveyance. Thus, a Bona fide purchaser is a person , who acts in
good faith , without any notice of the real title over the purchased property, purchases that
property from a person , who himself not having a good title over that property, Here, 2
things must be noticed that , Firstly, He is acting in good faith, secondly, he must be honestly
in his intentions and thirdly, he purchased the property with a false notice of false title over
the purchased property but as he is the bona fide purchaser , his rights and interests are
protected under the laws. Thus, here we see that Bonafide Purchasers act in good faith and
has no notice of the good title over the property even after a reasonable care and
investigation. But, final thing is that, they are ultimately Bonafide and were not aware of the
real title over the property even after a reasonable enquiry. Thus TP Act. provides them some
Rights and Immunities so that their interest, over the property, though purchased under a
defective/bad Title must be protected. This concept is an exception to the rule contained in
the maxim Nemo dat quo non hobet and also of Section 27 of Sales of Goods Act.


1) RIGHTS UNDER TRANSFER OF PROPERTY ACT There is some rights provided to the Bona
fide Purchasers, who purchase the property under defective Title. These Rights are provided
by the TPA , though not severally having a distinct chapter or section covering or defining it
yet, these rights can be found , in many different sections of the TP Act., mainly in ,Part B of
Chapter II containing Sections form Sec. 38 to Sec. 53 A. Here, author has created a
separate chapter, only dealing with the rights of the Bonafide Purchasers. There are several
rights incorporated in TP Act. and these rights are now discussed below-:1.) RIGHT OF BONA
Section 41 of Transfer of Property Act, 1882, which says that Where, with the consent,
express or implied, of the persons interested in immoveable property, a person is the
ostensible owner of such property and transfers the same for consideration, the transfer shall
not be voidable on the ground that the transferor was not authorized to make it: provided
that the transferee, after taking reasonable care to ascertain that the transferor had power to
make the transfer, has acted in good faith. This right is an exception to the rule of Latin
maxim nemo dat quo non habet and Section 27 Sales of Goods Act, which says that a man
who himself not possess a better title, cannot transfer a better title to other person. The
present right is based on the principle that where two person 1. Real Owner, 2. Bonafide
Purchaser, suffers from the fraud of a third person or party (ostensible Owner) , the loss
must fall on the person who has created or who was having the last opportunity to prevent
the fraud, that is the real owner , and the ownership will pass to the innocent person trapped
by the fraud (Bonafide Purchaser) . Thus section 41 adds a big rider to the protection
accorded by it. It is that if transferee has acted in good faith and has taken reasonable care
as to ascertain what is real position is then transferee shall be protected against the rights of
real owner. This right is based on the principles of equity that one, who allows another to
hold himself out as the owner of a property and a third party purchased for value from the
apparent owner in the belief that he was the real owner, the man, who , so allows the other
to hold himself out, shall not be permitted to recover upon the secret title , unless he can
overthrow that purchaser by showing either that he had direct notice or something which
amounts to constructive notice of the real title , or that there existed circumstances which
ought to have put him upon enquiry, which it prosecuted would led to the discovery of it .
This right can only be exercised by the Bona fide Purchaser under a voluntary purchase- sale,
not under any involuntary sale such as Auction- Purchaser. For this act a Mortgagor, manager
of an idol or menial servant in the occupation of the property cannot be treated as the
ostensible owner. Only that person will be entitled to claim protection by this right, who even
after reasonable care and enquiry, were not able to find the real owner of the property and
has full belief that the person making a transfer in this favour is the person really entitled to
that property, taking the transfer from him. A mortgagee from an ostensible owner acting in
good faith and with reasonable care has frequently been allowed the benefit of the section.
The basic two ingredients which can be interpreted from this section to protect the rights of a
bona fide transferee against the transferor are :- a. Reasonable Care Reasonable Care means
such care as an ordinary man of ordinary prudence will take. A Bona fide Purchaser is
expected to have taken such reasonable care at the time of purchasing the property about
the real ownership or title over the property. Reasonable care means such care as an
ordinary man of business would take. Where there was absence of reasonable care and
ordinary prudence on the part of transferee to ascertain the power of transferee or for the
purposes of making a valid transfer, the transferee will not be protected under section 41.
Only those transferees right are bona fide and can claim protection who, despite necessary
inquiry, have not been able to discover who is the real owner of property is, and who have
full believe that the person making a transfer in their favour is the person really entitled to
that property, taking the transfer from him. Good Faith Reasonable Care is not only enough,
if there is absence of good faith. It is really required for a transferee to have acted in an
honest manner and in the real belief that the ostensible owner is the real owner. So when a
person purchased possessory title believing in good faith that his vendor was real owner and
an inquiry that he could have made would only be confirmed him in that belief, then that
person will be protected under this section.

In Luchman v Kallicharan, A held out his wife as the owner of the property by taking the sale
deed in her name with a recital that the purchase money was paid out- of her stridhan. After
the death of A, his wife sold the property to the defendant that purchased it Bonafide and for
value. As son, as his heir sued to recover possession of the property from the defendants. It
was held, that he could not recover possession. The court observed that there was
misrepresentation by the father in allowing the property to be taken by the wife under a deed
of sale, representing that the purchase money was her stridhan and in all his acts both public
and private during his life-time representing that it was his wifes property. After such
representation his heirs were no more entitled to recover, than the father would have been in
his life time. Ramcoomar Koondoo v. John and Maria McQueen The Privy council observed
that the principle of the natural equity must be universally applicable that, where one man
allows another to hold himself out as owner of an estate, and a third person purchases it, for
value from the apparent owner, in the belief that he is the real owner, the man who so allows
the other to hold himself out shall be not permitted to recover his secret title, unless he can
overthrow that of the purchaser by showing either that he had no bona fide intention to
purchase the property or even after knowing about the real title he doesnt made inquiry.


This right is dealt by 1st para of Section 43 of Transfer of Property Act, 1882, which says
that:- Where a person [fraudulently or] erroneously represents that he is authorized to
transfer certain immovable property, and professes to transfer such property for
consideration, such transfer shall, at the option of the transferee, operate on any interest
which the transferor may acquire in such property at any time during which the contract of
transfer subsists. ILLUSTRATION- A, a Hindu, who has separated from his father B, sells to C
three fields, X, Y, and Z, representing that A is authorized to transfer the same. Of these
fields Z does not belong to A, it having been retained by B on the partition but on Bs dying A
as heir obtains Z. C, not having rescinded the contract of sale, requires to him. The right
provided to the Bona fide Purchaser in the instant section is against the person, who
fraudulently or erroneously represents to Bona fide Purchaser, that he is absolutely
authorized to transfer the property , and at the same time professes to transfer the property
for consideration, and entered into one contract of sale but in reality at this time he himself is
not authorized to transfer that immovable property, but subsequently at any time in future
becomes authorized to transfer by any reason. But the consequence of such right to the
Bonafide Purchaser is that, even such transfer will not become void or voidable but at the
option of transferee becomes operative, on any interest which the transferor acquires
subsequent over that immovable property at any time before the quashing of the contract of
the sale/transfer, thereby preventing the interest of the Bonafide Purchaser. The reason for
such protection or the principle on which this section is based is Feeding the estoppels. The
principle on which this section is embodied calling upon transferor who represents
fraudulently or erroneously to Bonafide Purchaser to deliver the disputed property to Bonafide
Purchaser, lies on doctrine of estoppels. The principle is based partly on the common law
doctrine of estoppels deed and partly on the equitable doctrine that a man who has promised
more than he can perform must make good his contract when he acquires the power of
performance. Law of estoppels here compels the transferor who made the representation to
deliver the immovable property to the Bonafide Purchaser on his becoming of subsequent real
owner. In the matter of Rajapakse v Fernando , privy council applied rule of estoppels as
Where a grantor has purported to grant an interest in land which he did not, at the time,
possess, but subsequently acquires, the benefit of his subsequent acquisition goes
automatically to the earlier grantee, or as it is usually expressed, feeds the estoppels. This
right is interconnected sustainably with the previous right and is dealt by the 2nd Para of
Section 43 which says that nothing in this section shall impair the right of transferees in good
faith for consideration without notice of the existence of the said option. The thing to be
noted that in the first Para of Section 43 it is provided that a person who fraudulently
represents to a transferee that he is the real owner of the property and thereby professes to
transfer the property, and trapped by this representation transferee entered into the contract
of sale with the transferee in such case when the transferor subsequently became the owner
of that property and claim is made by the transferee in , the transferor is under a legal
obligation to transfer that property to that transferee. One thing here to be noticed is that, as
soon as transferor gets the ownership over the property, transferee must claim for that
property but if he fails to claim for it immediately and in the mean time, transferor transfer
that property to somebody else who is in good faith and with no notice of previously made
option purchases that property then previous transferee cannot claim for that property as he
is late in the eyes of Law. Thus, this right is the right of the Bona fide purchaser for value
who do not have notice of previously made option for transfer and thus purchases that
property by using his legitimate right and thereby impairing the right of the first transferee
though he is a Bonafide purchaser. Thus, this right incorporated in the 2nd Para of Section 43
is an exception to the previous discussed right mention in 1st Para of Section 43.

Narayan Chand Shaha v. Dipali Mukherji In the instant case the son transferred the property
still in the name of father. This fact was known to the transferee. Father died and son became
co-owner of that property. The court had held that there was no evidence on record to show
that the son made statement that the property belongs to him. There was no representation
regarding the authority to sell. As such buying, such property is a collusive conduct. There
are no estoppels when the truth was known to transferee. Hence the transferees right is not
protected since he was not bona fide. Rajapakse v Fernando the Privy Council applied rule of
estoppels as Where a grantor has purported to grant an interest in land which he did not, at
the time, possess, but subsequently acquires, the benefit of his subsequent acquisition goes
automatically to the earlier grantee, or as it is usually expressed, feeds the estoppels


This right is dealt by the Section 51 of the Transfer of the Property Act, 1882, says that When
the transferee of immoveable property makes any improvement on the property, believing in
good faith that he is absolutely entitled thereto, and he is subsequently evicted there from by
any person having a better title, the transferee has a right to require the person causing the
eviction either to have the value of the improvement estimated and paid or secured to the
transferee, or to sell his interest in the property to the transferee at the then market-value
thereof, irrespective of the value of such improvement. The section provides aid to the
transferee of certain land, on which the transferee has prepared some improvements bona
fide under a wrong assumption that he himself has a good title over that property. If this
Bona fide transferee is later on evicted by the person having a good title over that property
he can claim his right for the compensation of all the improvements which he had made over
that property under a bona fide believe. If a person purchases a property under good faith
and with the notice that he has now become the real owner, the person is certainly entitled to
make any improvements over that property but if in reality his title is not good and
subsequently is evicted by a person having good title over that property, purchaser can take
the plea of his right that is right to get the compensation for the improvements made under
good faith under defective title and will become entitled to the compensation which must be
equal to the market value of the improvements so made at that time . But if a person makes
the improvement with the knowledge that he has no authority or title to the property, he is
not entitled to the payment for the improvement. The right incorporated in section 51 is
based on the maxim He who seeks equity must do equity meaning is quite apparent. Thus, a
person cannot be allowed to enrich himself at the cost of another. It means that if you
purchase any property from any benamidar in good faith and in a bona fide intention, then
you are certainly entitled to make any improvements, you like in that house. If anyone sees
to recover the possession of house on strength of his title then he can do so only by paying
off the costs of improvements. Thus a person who needs equity must provide equity to other
also by paying compensation equal to the market value of the improvements at that time.
The bona fide purchaser has the option of compensation for the improvements if he satisfies
the conditions that:- a. He must have held possession under the colour of title b. His
possession must be under the honest belief that he has secured good title of the true owner.
c. He must be under the honest belief that he has secured good title to the property in
question and is the owner thereof. Thus, to take the plea of the right enumerated in section
51 the above provided conditions must be fulfilled. Hence the principle underlying these
provisions of law is that no man should enrich himself at the expense of another and
consequently where the defendant had made improvements in a good faith as a bona fide
occupant of the land and in the belief that the land is his own, the plaintiff who obtains the
benefit of the expenditure which has increased the value of the property, ought to reimburse
the defendant for the expenditure so incurred. So, where a person is under the bona fide
impression then he is entitled for the benefit of section 51. In a case of American Bapatist
Foreign Mission Society v. Pattabhiramaya, court had held that good faith has to be proved by

Ramsen v. Dyson Court held that: - If a stranger begins to build on my land supposing it to
be his own land in good faith and I perceiving his mistake abstain from setting him right and
leave him to persevere in his error, a court of equity will not allow me afterwards to assert
my title to the land on which he had expended money on the supposition that the land was
his own. Jahangir Begum v. Gulam Alim Ahmad In this noted case there was on the record a
letter of the plaintiff to the defendant that he was agreeable to sell the land for Rs. 1335 to
Naseer Yar Jung saying that the agreement was only nominal in his name and the sale was to
be in his favour of the defendant. It was held by the court that the defendant did believe in
good faith that he was entitled to the property. Lachmi Prasad v. Lachmi Narain In the instant
case a Hindu father, both on his account and also as guardian of his son, executed a sale of
joint family property. The son brought a suit to recover the property and the court found that
there was no necessity for the sale. By the application of section 51 courts interpreted that
bona fide and good faith also includes the honesty and thus the plaintiff was held liable to pay
the compensation. Kedar Nath v. Mathu Lal , In this matter a Hindu widow sold property, in
which she had only a widows estate, without legal necessity. The reversionary, at whose
instance, the sale was set aside, was put on terms to compensate the vendee for the
improvements he had made. Hiralal v. Gordhan , Court specifically said that this right only
makes entitled to transferee for any compensation trespassers are out of the purview of this
section. In this case, A purchased the property of a minor from his de facto guardian in the
belief that he is entitled to sell. When A was evicted by the minor, the purchaser was entitled
to the


The right is dealt by section 53 of TPA and has two parts:- a. 53 (1) b. 53 (2) (a) This Right
of the Bona fide Purchaser is incorporated in Section 53(1) which says that if a property is
transferred by a person who is heavily indebted and transfer the property for consideration to
a Bona fide purchaser with good faith and without notice, with intent to defraud or delay the
creditors, the rights over the property transferred to that Bona fide purchaser will not be
hampered. But if the transferor and the transferee engaged together in the work of
defrauding or delaying the creditors, transferee will be stopped from taking the defence of
this right and the transaction will be voidable at the option of the creditors but require that
such a suit must be instituted either in a representative capacity or for the benefit of all the
creditors. ILLUSTRATION- A, who is heavily indebted , and against whom a suit for the
recovery of debts is going to be filled, sells his house to B to save it from being attached and
sold in payment of the debt. If B knows of As fraudulent intention, the sale to B is liable to be
set aside at the option of the creditors. It will be seen that the rights of a transferee in good
faith and for consideration are not affected even though the transfer is made with intent to
defeat the creditors. The right is based on the principle of equity, is just to prevent the rights
of the Bona fide purchaser over the property transferred to him for consideration and under
good faith without notice of transferors fraudulent intention of defrauding or delaying the
creditors. If the transferee participated in the transferors intention then the transfer will be
set aside at the option of creditor even if it is for consideration. Where the transferor has
fraudulent intention, the transferee will only be protected if he proves that he acted in good
faith and he has paid consideration for the transfer. Non-participation in the transferors
fraudulent intention constitutes good faith on the part of transferee. (b) This right is dealt by
section 53 (2 ) of TPA, every transfer of immovable property made without consideration with
intent to defraud a subsequent transferee shall be voidable at the option of such transferee,
but it is provided that such transfer should not be deemed to be fraudulent by reason only of
any subsequent transfer for consideration. This section says that when a person transfer a
property gratuitously to a person with an intent to defraud any subsequent transferee, on the
option of this subsequent transferee the gratuitous transfer can become voidable.
ILLUSTRATION- A settles his property to his son. This is done in a will executed and
registered by A. He sells the property to B. It is subsequent to settlement. Ordinarily B should
get nothing. But if he can prove that settlement was made pending negotiation of sale to B
and it was made with intent to defeat B. And B is a Bonafide purchaser for value without
notice; the settlement would be voidable at the option of B. CASE STUDY--- Palamalai
Mudaliar v South India Export Company , In the instant matter the property was purchased
by a person who knew that the transferor desired to convert it into cash which could be easily
secreted so as to defeat the creditors. It was held that the transfer was voidable under
Section 53. Thus due to aid and support of transferee to the transferor in the present matter,
transferee cannot take the plea of the present right. Ratan Devi Moondana v. Jawaharlal
Sultanmal, Mesers In the instant case the creditor filed a suit against the debtor Bajrang Lal.
During the pendency of the suit Bajrang Lal executed the sale-deed of the building which
belonged to him in favour of his wife. There was a genuine debt of more than Rs. 20000
outstanding in favour of his wife against her husband. It was held that the transfer by the
Bajrang Lal of the building in suit in favour of his wife was not voidable under section 53. It
was merely a preference of one creditor over another. Such a preference does not amount to
a transfer defeating or delaying the creditors, within a meaning of section 53. Jivaram
Jagjivan Das v. Kantilal Keshavlal Trivedi In the instant case a house was mortgaged. The
mortgage was binding upon all the members of family because it was joint at the time of
mortgage. After the execution o mortgage the family was partitioned. But the arrangements
were not made for the payments of debts. It was held that the partition was fraudulent in so
far as it did not make any provisions for the payments of debt due upon the mortgage.


Rights of the Bonafide purchaser are always protected and shall not be vested; this is in fact
the general rule and the intention of the legislation behind making an act that is Transfer of
Property Act in 1882. But as every coin has two sides, here the TPA does also have two sides
that is one the protection of the rights of the Bona fide purchaser, and second its exception.
In the present chapter we will deal with the exception rule of protection of rights of Bonafide
purchaser even under defective title. The only Section involved is Section 52 of the Act. Now
the author has systematically elaborated the exceptions below: There is one exception to the
general rule for the protection of the rights of the Bonafide purchaser and is dealt by Section
52 of the Transfer of Property Act. The principle in section 52 of TPA says that Where a
litigation is pending between a plaintiff and a defendant as to the right of a particular estate,
the necessities of mankind require that the decision of the court in a suit shall be binding, not
only on the litigating parties, but also on those who derive title under them by alienations
made pending the suit whether such aliens had or had not notice of the pending proceedings.
If this were not so, there could be no certainty that litigation would ever come to an end. The
doctrine imposes a prohibition on transfer or otherwise dealing with any property during the
pendency of a suit, provided that the conditions laid down in the section are satisfied. The
Section is based on the principle or the doctrine of lis pendens in the maxim ut lite pendent
nihil innoveture meaning that nothing new , should be introduced in the pending litigation.
The literary meaning of the lis pendens is: a suit under consideration of any court of law. The
doctrine can be defined as the jurisdiction, power or control which court acquires over
property involved in a suit, pending the continuance of the action, and until final judgment
therein. This doctrine rests upon public policy. This doctrine is based on justice, equity good
conscience and public policy thus no question of good faith or Bonafide arises The basis of the
rule of lis pendens was explained by Turner L.J., in the case of Bellamy v Sabine , in the
following words.-It is, as I think, a doctrine common to the courts, both of the law and Equity
and rests as I apprehend, on the foundation, that it would plainly be impossible that any
action or suit could be brought to a successful termination. If alienations pendent lite were
permitted to prevail, the plaintiff would be liable in every case to be defeated by the
defendants alienating before the judgment or decree, and would be driven to commence his
proceedings de novo, subject again to be defeated by the same course of proceedings. Only a
dispute of immovable property is attracted by the section. This section strictly apply against
the Bona fide purchaser, thus even they are not protected but are defected by this section.
Thus, where the vendees purchased property from vendors during pendency of a civil suit
against vendors for specific performance of agreement to sell property, it was held that they
would be bound byte decree against the vendors. The plea that they were bonafide
purchasers without notice would be of no consequence. In Shyam Lal v Sohan Lal, held that a
transferee pendent lite is bound by the decree just as much as he were a party the suit. Such
transferee puts himself in privities with the suit, and must treated not as a stranger to the
suit, but as a party to it and consequently bound by the terms of the decree in full. Hence the
general principle of the protection of rights of Bonafide Purchaser is not applicable in case
section 52 is applicable. Thus, in a clear and straight sense, section 52 is an exception to the
general rule of Transfer of Property. To apply this section, there are certain conditions which
must be followed and the transfer will be finally subject to the decree of the court. The effect
of doctrine is that the transferee is bound by the decision of the court. It does not prevent
the vesting of the title in him but makes it object to the rights of the parties as decided in the
suit. According to the wordings of the section the transfer pendent lite is valid and good to
the extent that it does not conflict with the rights of the parties in a suit as established.

CASE STUDY--- Faiyaz Hussain Khan v. Prag Narain The plaintiff was a purchaser in
execution of a decree based on a first mortgage of the property in suit. The defendant was in
a possession as a purchaser in execution of a decree or a second mortgage of the same
property, passed in a suit to which the first mortgagee was not made a party. The second
mortgage was executed after the institution of the suit of the first mortgage but before the
summons had been served. It was held by the Privy Council, that the doctrine lis pendens
applied, and that the plaintiff had a better title. Mulchand v. Ganga Jal In the instant case
during the pendency of a pre-emption suit, the vendee sold the property which was the
subject matter of the litigation to a person possessing a right of pre-emption equal to that of
the pre-emptor in recognition of that persons right of pre-emption. This re-sale took place
before the expiry of the period of limitation for instituting a pre-emption suit with respect to
the original sale. The full bench held that the doctrine of lis pendens applied to the pre-
emption suits but in that case, the re-sale in question has no conflict with the doctrine of lis

Thus, we can see that the present project has clearly laid down the rights and remedies of
the bonafide purchasers very much detail. We can see that a good faith transfer by a bona
fide person without any notice of its real title is a valid transfer and acceptance but subject to
the rule enumerated in Section 52. Section 52 which says that no one can transfer a disputed
property regarding which proceeding or suit is pending before the court of the law is also a
principle enumerated for the protection of the interest of public and as a public policy Also
many of the rights provided above are an exception mainly to the maxim nemo qoud dat
non habet, but are justifiable under the law as based on the principle of justice, equity and
estoppels. Thus, the ways are given above by which bona fide purchasers can be protected.

Anand Mishra, 2nd year,

Hidayatullah National Law University, Raipur,
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2 Comments for this Article

Wrote on 20 February 2013
Thanks Anand, Excellent article

Wrote on 18 June 2011
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