TRANSFER OF PROPERTY ACT, 1882 — Section 58(c)
Mortgage by conditional sale — Mandatory statutory requirement — Condition must be in same document
For a transaction to constitute a mortgage by conditional sale, the condition that the sale shall become void or that reconveyance shall take place must be embodied in the very document which effects or purports to effect the sale.
Where the registered Sale Deed contained no such condition, the transaction cannot be treated as mortgage by conditional sale.
(Proviso to S.58(c) strictly applied.)
(Paras 44–49)
INDIAN EVIDENCE ACT, 1872 — Sections 91 & 92
Registered sale deed — Clear and unambiguous terms — Bar on oral evidence
Where the terms of a registered Sale Deed are clear, categorical and admit of no ambiguity, extrinsic or oral evidence is inadmissible to contradict its contents.
Oral evidence is not permissible merely to allege that the document was intended as security, unless foundational facts satisfying statutory exceptions are pleaded and proved.
(Paras 15–18, 41–43)
REGISTERED DOCUMENT — PRESUMPTION
Strong presumption of validity and genuineness
A registered Sale Deed carries a formidable presumption of validity.
The burden to rebut such presumption lies heavily upon the person alleging that the document is sham or nominal.
Courts must not casually or lightly declare a registered document to be fictitious.
(Paras 31–33, 38)
PLEADINGS — Order VI Rule 4 CPC
Allegation of sham transaction — Requirement of strict pleadings
A plea that a registered document is sham, nominal or fraudulent must satisfy rigorous pleading standards, akin to Order VI Rule 4 CPC.
Mere use of expressions such as “sham”, “nominal” or “fraud” without material particulars amounts to clever drafting creating illusion of cause of action, and cannot displace statutory presumptions.
(Paras 34–41)
SALE DEED v. MORTGAGE
Intention of parties — To be gathered primarily from document
Where the Sale Deed:
-
recites absolute transfer of ownership,
-
records full consideration,
-
contains indemnity clause,
-
acknowledges delivery of possession, and
-
is followed by execution of a registered lease deed,
the intention of parties is clearly that of an outright sale and not a mortgage transaction.
(Paras 43–55)
RENTAL AGREEMENT — EFFECT
Execution of lease after sale — Admission of ownership
Execution of a registered Rental Agreement by the vendor in favour of purchaser subsequent to sale deed:
-
acknowledges change of status from owner to tenant, and
-
constitutes strong evidence that the sale was intended to be acted upon.
Payment of rent for fourteen months reinforces genuineness of sale.
(Paras 5–9, 54–55)
ADMISSION — LEGAL NOTICE REPLY
Reply admitting tenancy and arrears — Evidentiary value
Where the executant:
-
replies to eviction notice admitting default in rent, and
-
undertakes to clear arrears,
such reply constitutes a clear admission, especially when no plea is taken that reply was issued under mistake or without understanding contents.
(Paras 6–8, 73–75)
INADEQUACY OF CONSIDERATION
Does not invalidate sale
Mere allegation that consideration was inadequate does not render a sale deed void.
In absence of proof of total absence of consideration, Explanation 2 to Section 25 of the Contract Act applies.
(Para 60)
MUNICIPAL RECORDS — MUTATION
Not proof of title
Non-mutation of purchaser’s name in municipal or revenue records and payment of taxes by vendor do not defeat title created under registered Sale Deed.
Revenue entries do not confer ownership.
(Paras 61–65)
EVIDENCE — SUBSEQUENT CONDUCT
Subsequent conduct such as payment of taxes or continued possession cannot override:
-
express recitals of registered conveyance, and
-
statutory presumptions attached thereto.
(Paras 61–65)
GANGABAI v. CHHABUBAI — (1982) 1 SCC 4
Distinction explained
Principle permitting oral evidence to prove sham transaction applies only where:
-
execution itself was not intended to operate at all.
It does not apply where:
-
parties knowingly executed registered sale and lease deeds, and
-
subsequent conduct affirms transfer.
High Court erred in mechanically applying Gangabai.
(Paras 72)
CIVIL PROCEDURE — SECOND APPEAL
High Court exceeded jurisdiction
High Court erred in:
-
ignoring statutory presumptions,
-
misapplying Section 92 Evidence Act, and
-
restoring trial court decree contrary to settled law.
Interference warranted.
(Paras 72–78)
ANALYSIS OF FACTS AND LAW
1. Nature of dispute
The litigation arose from a registered Sale Deed dated 12.11.1971 followed by a registered Rental Agreement of the same date.
The vendor later sought declaration that:
-
sale deed was sham and nominal;
-
transaction was actually a mortgage;
-
eviction proceedings should be restrained.
2. Trial Court approach
The Trial Court:
-
relied heavily on oral testimony,
-
ignored statutory bar under Sections 91–92 Evidence Act,
-
treated subsequent conduct as decisive, and
-
declared the sale deed sham.
3. First Appellate Court
The First Appellate Court reversed the decree holding:
-
intention must be gathered from document;
-
oral evidence barred;
-
sale was genuine and intended to operate.
4. High Court error
The High Court restored trial court decree relying almost entirely on Gangabai without:
-
examining Section 58(c) TPA proviso;
-
appreciating registered lease deed;
-
addressing admissions in reply notice;
-
applying Order VI Rule 4 CPC standards.
5. Supreme Court correction
The Supreme Court held:
-
Registration creates strong presumption of genuineness.
-
Sham plea requires strict pleadings and strong proof.
-
No clause of reconveyance existed in sale deed.
-
Mortgage by conditional sale statutorily impossible.
-
Subsequent tax payments and possession irrelevant.
-
Reply notice admitting tenancy fatal to plaintiff case.
The Court restored the judgment of the First Appellate Court.
RATIO DECIDENDI
A registered Sale Deed carrying clear and unambiguous terms of absolute transfer cannot be declared sham or nominal merely on the basis of oral evidence or subsequent conduct; in the absence of a reconveyance condition embodied in the same instrument as mandated by the proviso to Section 58(c) of the Transfer of Property Act, the transaction cannot constitute a mortgage by conditional sale, and the strong statutory presumption of validity attached to registered instruments can be displaced only by specific pleadings and cogent proof satisfying the standard under Order VI Rule 4 CPC.
No comments:
Post a Comment