The Supreme Court has set aside a Karnataka High Court judgment which had declared a registered sale deed and a contemporaneous rental agreement as sham and nominal, reiterating that courts must exercise extreme caution before invalidating registered instruments that carry a strong presumption of legality and genuineness.
Allowing a civil appeal filed by the legal representatives of the deceased petitioner, the Court restored the judgment of the first appellate court, which had upheld the validity of a 1971 sale deed executed by the respondent in respect of a residential property at Bidar. The Bench of Justice Rajesh Bindal and Justice Manmohan held that the High Court erred in permitting oral evidence to dislodge the clear and unambiguous terms of a registered sale deed and a registered lease deed, contrary to Sections 91 and 92 of the Indian Evidence Act.
The dispute arose from a transaction dated November 12, 1971, under which the respondent executed a registered sale deed in favour of the deceased for a consideration of ₹10,000. On the same day, a registered rental agreement was executed, permitting the respondent and his family to continue in occupation of the property as tenants. After default in payment of rent, eviction proceedings were initiated, following which Tukaram filed a suit seeking a declaration that the sale deed and rental agreement were nominal and not intended to be acted upon, contending that the transaction was in substance a mortgage.
While the trial court accepted this plea and declared the sale deed to be sham, the first appellate court reversed the finding, holding that oral evidence could not be admitted to contradict the terms of a registered document. The High Court, however, restored the trial court decree, relying on precedents to hold that oral evidence was admissible to show that a document was never intended to be acted upon.
Disagreeing with the High Court, the Supreme Court emphasised that registration is a solemn act which creates a formidable presumption in favour of the validity of a document. The burden to rebut this presumption, the Court held, lies heavily on the party alleging that the document is sham, and such a challenge must be supported by clear pleadings with material particulars and cogent evidence. Mere allegations, inadequacy of consideration, or subsequent conduct such as continued possession or payment of municipal taxes were held insufficient to invalidate a registered sale deed.
The Court also noted significant inconsistencies in the plaintiff’s case, including the absence of specific pleadings to meet the standard under Order VI Rule 4 of the Code of Civil Procedure, the failure to challenge the registered rental agreement despite payment of rent for several months, and the omission to raise any allegation of sham transaction in the reply to the eviction notice. The Bench further found that the sale deed did not contain any clause indicative of a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act.
Observing a growing tendency to casually challenge registered property transactions ‘at the drop of a hat’, the Court cautioned that undermining the sanctity of registered documents would erode public confidence and destabilise property titles. It concluded that the sale deed in question was a bona fide transaction intended to be acted upon and not a disguised mortgage, and accordingly allowed the appeal.
Court’s Recommendation for Blockchain-Based Land Records
The Court, while parting with the matter, underscored the pressing need for systemic reform in the manner in which registered documents and land records are maintained across the country. It is recommended that the Union and State Governments urgently move towards comprehensive digitisation of such records by adopting secure and tamper-proof technologies, including blockchain. The Court noted that a blockchain-based ledger system would ensure that once a transaction relating to sale, mortgage or similar dealings is recorded, it remains immutable and cryptographically secure, thereby drastically reducing the scope for manipulation.
Emphasising that such reforms are vital to curb forgery and the menace of “clever drafting” that burdens the judicial system, the Court observed that registered documents must inspire absolute confidence to ensure ease of doing business in a modern economy.
Appearances
Petitioner- Mr. Bhardwaj S Iyengar, Adv. Mr. Anshuman Ashok, Adv. Mr. Vikas Upadhyay, AOR Mr. Ranveer Singh, Adv.
Respondents- Mr. Savyasachi, Adv. Mr. Abhay Choudhary M, Adv. Mr. Tarun Kumar Thakur, Adv. Ms. Anuradha Mutatkar, AOR
