Friday, October 15, 2010

SC: No land deal final until registered

No land deal final until registered, rules apex court

New Delhi, Oct 14 (IANS): The Supreme Court has held that no land transaction would attain finality unless it was duly registered and no sale deed of land would get a back-dated finality by its registration subsequently.

The court said that a transaction in land would only be complete on the date of the registration of the sale deed.

In its 'inescapable conclusion', a bench of Justice P. Sathasivam and Justice B.S. Chauhan said the sale executed between the seller and the buyer in respect of a land 'could not be termed as a complete sale until the document got registered'. The judgment, delivered Friday, was only made available Thursday.

The apex court set aside the verdict of the Punjab and Haryana High Court which had upheld the trial court verdict that a sale deed becomes effective on the date of its execution as its registration relates to the date of its execution. Thus the trial court held that a suit challenging the transaction in land would not invite the doctrine of lis pendens (Latin for suit pending) if it is filed between the execution of sale deed and its registration.

Dismissing the conclusions of the trial court, Justice B.S. Chauhan, speaking for the bench, said that if in the course of the execution of a sale deed and its registration, a suit challenging that transaction has been instituted, then it would attract the doctrine of lis pendens.

The apex court said that section 47 of the Registration Act, 1908, provides that registration would relate back to the date of execution of the sale deed but it would not grant finality to the sale deed retrospectively (from the date of execution of sale deed).

The case was of Mam Chand (now dead) of Asraka Majra village in Haryana's Rewari district, who mortgaged his 22 kanals (approximately 1.09 hectares) of land to one Har Narain (now dead) for Rs.7,000 in 1970.

Subsequently he sold eight kanals (approximately 0.39 hectares) to Har Narain for Rs.7,500. Mam Chand got Rs.200 as earnest money and the rest was adjusted against the mortgaged land.

However, Mam Chand then sold his land to five people (all respondents in the case) Aug 2, 1971 and this sale deed was registered on Sep 3, 1971. Har Narain filed a suit Aug 10, 1971 seeking to restrain Mam Chand from alienating him from the said lands. This suit was dismissed Sep 4, 1971.

Besides other grounds for dismissing the suit, the trial court had held that the sale deed deemed to have come into force Aug 2 as its registration Sep 3 relates back to the date of the execution of sale.

Thus the trial court held that since the sale deed became effective Aug 2 and the suit by Har Narain was filed on Aug 10, the transaction did not attract the doctrine of lis pendens.

Setting aside the verdict of the high court and the lower courts, the apex court restored the eight kanals of land bought by Har Narain to his legal heirs. The legal heirs of Mam Chand were directed to pay the amount he received for the sale of these lands plus 10 percent interest.

The court said that legal heirs of Mam Chand would be entitled to the rest of the land in the wake of quashing of the sale of the land to five respondents.




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CIVIL APPEAL NOs.995-996 OF 2003

Har Narain (Dead) by LRs. ------- Appellant


Mam Chand (Dead) by LRs. & Ors. ------- Respondents




         1.        These   appeals   have   been   preferred   against   the judgments   and   orders   dated   9.10.2001   and   9.9.2002 passed   by   the   High   Court   of   Punjab   &   Haryana   High Court   at   Chandigarh   in   R.S.A.   No.1545   of   1979 dismissing   the   Regular   Second   Appeal,   as   well   as   the Review Application, filed by the appellant concurring with the judgments and orders of the trial Court as well as of the First Appellate Court on all issues raised in the case.

        2.        Facts   and   circumstances   giving   rise   to   these appeals   are   that   the   defendant/respondent   No.1-Mam Chand   (since   deceased   through   LRs.)   (hereinafter   called the `respondent') was the owner of land admeasuring 22 kanals   situate   within   the   Revenue   estate   of   Village Asraka   Majra,   District   Riwari,   Haryana.     The   said respondent   had   mortgaged   the   entire   land   in   favour   of the predecessor-in-interest of the appellant, namely, Har Narain (since deceased and now represented through his LRs.)   for   Rs.7,000/-.   The   appellant   was   also   put   in possession of the said land.  The respondent No.1entered into   an   Agreement   for   Sale   of   8   kanals   of   the   said property with the appellant for Rs.7500/- and he received Rs.200/-   as   earnest   money   in   cash   while   a   sum   of Rs.7000/- to be adjusted as mortgage amount.  However, the   said   respondent   No.1   executed   the   sale   deed   on 2.8.1971 in favour of respondent nos.2 to 6.

        3.        Being   aggrieved,   the   appellant   filed   Suit   No.172   of 1971,   for   specific   performance   against   the   respondent No.1   for   executing   the   sale   deed   of   the   land   in   question on   10.8.1971   and   the   trial   Court   restrained   him   from alienating   the   suit   property   by   any   means.     Respondent No.1   moved   an   application   dated 16.8.1971   for vacating/modifying   the   interim   order   dated   10.8.1971 wherein he disclosed that the entire land in dispute had  already been alienated in favour of respondent nos.2 to 6. However,   the   sale   deed   executed   in   favour   of   the   said respondents   was   registered   on   3.9.1971.  The   suit   was contested   by   the   respondents   on   various   grounds, however, the trial Court dismissed the suit vide judgment and decree dated 4.9.1973 on various grounds, inter alia, that   sale   deed   deemed   to   have   come   into   force   on 2.8.1971,   as   the   registration thereof dated 3.9.1971 would   relate   back   to   the   date   of   execution   which had been prior to institution of the suit and thus, the doctrine of lis pendens would not apply.   The said respondents 2 to 6 were bona fide purchasers for consideration without notice. Therefore, the sale deed in their favour was to be protected. 

        4.        Being   aggrieved,   the   appellant   filed   First   Appeal No.508 of 1973, however, the same was dismissed by the First   Appellate   Court   vide   judgment   and   decree   dated 22.3.1979.     The   appellant   further   approached   the   High Court   by   filing   the   Regular   Second   Appeal   No.1545 of 1979   which   was   dismissed   by   the   High   Court   vide judgment and order dated 9.10.2001. However, as none had appeared on behalf of the appellant on the said date before the High Court, the appellant filed the application to   recall   the   said   judgment   and   order   dated   9.10.2001 under   Order   41   Rule   19   read   with   Section   151   of   the Code   of   Civil   Procedure,   1908   (hereinafter   called   `CPC'). The   said   application   was   allowed   vide   order   dated 9.9.2002   and   the   matter   was   heard   afresh   on   merit   on the same day.  The Court agreed with the proposition laid down   by   the   courts  below   that  principles  of   lis   pendens would   not   apply   in   the   facts   and   circumstances   of   this case as the sale deed has been executed before the filing of   the   suit   though,   the   same   was   got   registered subsequent   to   the   institution   of   the   suit.     Hence,   these appeals. 

        5.        Shri   Dhruv   Mehta,   learned   Senior   counsel  appearing for the appellant has submitted that the courts below reached the conclusion that doctrine of lis pendens was not applicable in the facts of the case merely on the ground   that   the   sale   deed   has   been   executed   by   the respondent No.1 in favour of respondent nos.2 to 6 prior to   institution  of  the  suit  and   the   registration  of  the  sale deed would relate back to the date of execution by virtue of   the   application   of   the   provisions   of   Section  47 of   the Registration Act, 1908 (herein after called the `Act 1908') without   taking   note   of   the   fact   that   the   execution   of   a sale   deed   of   immovable   property   of   more   than   Rs.100/- in   value   is   not   capable   to   transfer   the   title   unless   the deed   is   registered   as   required   under   Section   52   of   the Transfer of Property Act, 1882 (hereinafter called the `Act, 1882)   and   Section   17   of   the   `Act   1908.     In   case,   the appellant   had   been   in   the   possession   of   the   suit   land being the mortgagee of the entire property since long, the question of protection under Section 19(b) of the Specific Relief Act, 1963 (hereinafter called the `Act 1963') to the respondent   nos.2   to   6   that   they   were   bonafide purchasers   for   value   and   paid   money   in   good   faith without   notice   of   the   earlier   contract,   becomes meaningless   for   the   reason   that   they   had   a   notice   that the land was in possession of the appellant and this fact had also been mentioned by the respondent   No.1 in the sale   deed   dated   2.8.1971   in   their   favour.     Thus,   the appeals deserve to be allowed.

        6.        On the contrary, Shri R.K. Kapoor, learned counsel appearing   for   the   respondents   has   vehemently   opposed the   appeals   contending   that   there   are   concurrent findings of fact by three courts and this Court being the fourth   court  should  not  re-appreciate   the   factual   matrix of   the   case   and   interfere   in   the   appeals.     The   sale   deed might   have   been   registered   at   a   later   stage   but   the document   becomes   effective   from   the   date   of   its execution.   The findings so recorded by the courts below do not require any interference.   The appeals lack  merit and are liable to be dismissed.

        7.        We have considered the rival submissions made by learned counsel for the parties and perused the records. Admitted   facts   remain   that   the   entire   land admeasuring   22   kanals   had   been   mortgaged   by   Mam Chand, respondent No.1 in favour of appellant vide deed dated   30.6.1970   and   the   appellant   had   been   put   in possession   thereof.     The   possession   of   the   land   is   with the   appellant   since   1970.     An   agreement   to   sell   was entered into between the appellant and respondent No.1 on 25.5.1971.  Sale deed was executed by the respondent No.1 in favour of respondent nos.2 to 6 on 2.8.1971 and the   said   sale   deed  was   got   registered   on  3.9.1971. The suit   had   been   filed   on   10.8.1971   i.e.   subsequent   to   the date   of   execution   of   the   sale   deed   and   before   the registration   thereof   on   3.9.1971.   The   trial   court   also passed   an   ex-parte   order   dated   10.8.1971     restraining the   respondent   No.1   from   alienating   the   suit   land, however   it   was   subsequently   modified   vide   order   dated 31.8.1971.  The basic questions arise as to whether in  the fact-situation   of   this   case,   the   sale   deed   executed   by   the respondent No.1 in favour of respondent nos.2 to 6 could be subject to the doctrine of lis pendens and in case the appellant   had   been   in   possession   of   the   suit   land   being mortgagee since 1970, the respondent nos.2 to 6 can be held to be vendees without notice of an agreement to sell in favour of the appellant by the respondent no.1.

        8.        All   the   courts   below   have   proceeded   on   the presumption   that   as   the   registration   of   a   document relates   back   to   the   date   of   execution   and   in   the   instant                                                       case   though   the   registration   was   subsequent   to institution   of   the   suit,   it   would   relate   back   to   the execution   of   the   deed   and   the   doctrine   of   lis   pendens would   not   apply.     Further,   without   considering   the   fact that the appellant had been in possession of the suit land since 1970, though, this fact had been mentioned in the sale   deed   in   favour   of   respondent   nos.2   to   6   by   the respondent  No.1 whether it could be held that they were not put to notice of the fact that the appellant had some interest   in   the   property   and   whether   in   such   fact-situation   the   respondent   nos.2   to   6   may   be   entitled   for benefit of the provisions of Section 19 of the Act, 1963.  

        9.        Section   54   of   the   Act,   1882,   mandatorily   requires that   the   sale   of   any   immovable   property   of   the   value   of hundred   rupees   and   upward   can   be   made   only   by   a registered   instrument.       Section   47   of   the   Act,   1908, provides   that   registration   of   the   document   shall   relate back to the date of the execution of the document.  Thus, the   aforesaid   two   provisions   make   it   crystal   clear   that sale   deed   in   question   requires   registration.   Even   if registration   had   been   done   subsequent   to   the   filing   of Suit,   it related   back   to   the   date   of execution of   the   sale deed, which was prior to institution of the Suit.  A similar issue   though   in   a   case   of   right   of   pre-emption   was considered   by   the   Constitution   Bench   of   this   Court   in Ram   Saran   Lall   &   Ors.   v.   Mst.   Domini   Kuer   &   Ors., AIR   1961   SC   1747,   by   the   majority   of   3:2,   the   Court came to the conclusion that as the mere execution of the sale   deed   could   not   make   the   same   effective   and registration   thereof   was   necessary,   it   was   of   no consequence unless the registration was made.  Thus, in spite of the fact that the Act, 1908, could relate back to the date of execution in view of provisions of Section 47 of   the   Act,   1908,   the   sale   could   not   be   given   effect   to prior   to   registration.   However,   as   the   sale   was   not complete   until   the   registration   of   instrument   of   sale   is complete,   it   was   not   completed   prior   to   the   date   of   its registration.  The court held:

"Section 47 of the Registration Act does not, however,   say   when   sale   would   be   deemed   to be   complete.   It   only   permits   a   document   when registered, to operate from a certain date which may   be   earlier   than   the   date   when   it   was registered. The object of this section is to decide which of two or more registered instruments in respect   of   the   same   property   is   to   have   effect.  The   section   applies   to   a   document   only   after it has been registered. It has nothing  to   do   with   the   completion   of   the  registration   and   therefore,   nothing   to   do  with   the   completion   of   a   sale   when   the  instrument   is   one  of   sale.   A   sale   which   is  admittedly   not   completed   until   the  registration   of   the   instrument   of   sale   is  completed,   cannot   be   said   to   have   been completed   earlier   because   by   virtue   of  Section   47   the   instrument   by   which   it   is  effected,       after   it   has   been   registered,  commences   to   operate   from   an   earlier   date.  Therefore, we  do not think that  the  sale in this  case can be said, in view of Section 47 to have been completed   on   January   31,   1946." (Emphasis added).

       10.       This   view   has   subsequently   been   followed   and approved by this Court as is evident from the judgments in  Hiralal   Agrawal   Etc.   v.   Rampadarath   Singh   &   ors. etc.,   AIR 1969 SC 244;  S.K. Mohammad Rafiq  (Dead) by LRs. V. Khalilul Rehmad & anr.etc.,  AIR 1972 SC 2162;  Thakur   Kishan   Singh  (Dead)  v.   Arvind   Kumar, AIR   1995   SC   73;   and  Chandrika   Singh  (Dead)  by   LRs. V.   Arvind   Kumar   Singh  (Dead)  by   LRs.   &   Ors.,  AIR 2006 SCC 2199.

       11.       However, all these cases are related to right to pre-emption though the legal issue involved therein remained the same.   In view of the above, we are of the considered opinion   that   in   spite   of   the   fact   that   the   registration   of the sale deed would relate back to the date of execution, the   sale   cannot   be   termed   as   complete   until   its registration   and   it   becomes   effective   only   once   it   stands registered.  Thus, the fiction created by Section 47 of the Act,   1908,   does   not   come   into   play   before   the   actual registration of the document takes place.

       12.       In Guruswamy Nadar v. P. Lakshmi Ammal (Dead) through LRs. & Ors., (2008) 5 SCC 796, this Court dealt with a similar issue and considered the effect of doctrine of lis pendens and the provisions of Section  19(b) of the Act,   1963. Facts   of   the   said   case   had   been   that   an agreement   to   sell   stood   executed   between  the   first purchaser and owner of the land on 4th  July, 1974 for a sum   of  Rs.30,000/-   and  a  sum  of  Rs.5,000/-   was  given as advance. The remaining amount was to be paid before 31st  July,   1974. As   the   said   amount   was   not   paid,   the owner   again   sold   the   suit   property   to   another   party (appellant)   on   5th  May,   1975   for   a   sum   of   Rs.45,000/- and   possession   of   the   suit   property   was   handed   over   to the appellant therein.  Thus, the first purchaser filed the suit   for   enforcement   of   the   specific   performance   of   the contract.   The trial court dismissed the Suit holding that the   agreement   was   genuine   and   appellant   was a bonafide purchaser for value paid in good faith, without notice of the earlier agreement, therefore, no decree for specific performance   could   be   passed   in   favour   of   the   plaintiff therein.     The First   Appellate   Court     reversed   the   said judgment and decree. The Second Appeal was dismissed by the High Court. This Court considered the provisions of Section 52 of the Act, 1882, and Section 19 (b) of the Act,   1963,   and     held   that   as   the   subsequent   sale   was subsequent to the  filing  of the  Suit, Section 19(b)  of the Act 1963 read with Section 52 of the Act, 1882, could not grant   any   benefit   to   the   subsequent   purchaser   and   the subsequent   sale   was   subject   to   the   doctrine   of   lis pendens. Second sale could not have the overriding effect on the first sale.  The Court held as under:

"So far as the present case is concerned, it  is   apparent   that   the   appellant   who   is a subsequent   purchaser   of   the   same property,  has purchased in good faith  but  the   principle   of   lis   pendens   will   certainly  be   applicable   to   the   present   case notwithstanding   the   fact   that   under         Section   19(b)   of   the   Specific   Relief   Act  his  right could be protected."

       13.       In view of the above, it is evident that doctrine of lis pendens   would   apply   in   the   present   case   as   the registration   of   the   sale   deed  was   subsequent   to   filing   of the Suit and subsequent purchasers i.e. respondent Nos. 2   to   6   cannot   claim   benefit   of   the   provisions   of   Section 19(b) of the Act, 1963.

       14.       So   far   as   the   issue   of     notice   of   first   sale   to respondent   Nos.   2   to   6   is   concerned,   it   has   to   be examined bearing in mind that the sale deed in favour of the respondent Nos. 2 to 6 clearly disclosed that the Suit land had been mortgaged to the  appellant and it  was in his     possession   since   1970. In  R.K.Mohammed Ubaidullah & Ors.   v. Hajee C. Abdul Wahab  (Dead)  by LRs. & Ors., AIR 2001 SC 1658, this Court considered a similar case wherein   the   question   had   arisen   as   to whether   the   vendees   of   subsequent   sale   were bonafide purchasers   of   the   suit   property   in   good   faith   for   value without   notice  of   original   contract   and   whether   they were not required to make any inquiry as to the equitable or   further   interest   of   the   other   party   at   the   time   of execution of sale in their favour.   In view of the fact that they had been aware that the land was in possession of first   purchaser,   the   Court   took   note   of   the   definition   of "notice"   as   provided   in   Section   3   of   the   Act,   1882,   and particularly   Explanation   II  thereof   for   deciding   the   case. The said Explanation reads:  "Any person acquiring  any immovable property or   any   share   or   interest   in   any   such     property  shall be deemed to have notice of title, if any, of  any   person   who   is  for  the   time   being   in  actual  possession thereof." This Court came to the conclusion that in view of Section 19(b)   of   the   Act,   1963     and   definition   of   "notice" contained under Section 3 of the Act, 1882, it could not be   held   that   the   subsequent   purchasers   were   bona   fide purchasers in good faith for value  without notice  of the original contract and they were required to make inquiry as   to   the   nature   of   the   possession   or   title   or   further interest, if any, of the other party over the suit property at   the   time   when   they   entered   into   sale   transaction, notwithstanding,   that   they   were   already   aware   that   the other party was in possession of the suit property as the tenant.   Thus, what is material is the inquiry at the time when subsequent sale transaction was entered into.

       15.       The   instant   case   is   squarely   covered   by   the aforesaid   judgment,   so   far   as   this   issue   is   concerned. The   subsequent   purchaser   has   to   be   aware   before   he purchases   the   suit   property.     Thus,   we   are   of   the considered opinion that respondent Nos. 2 to 6 could not be held to be  bona fide purchasers for value paid in good faith without notice of the original contract and the sale in their favour was subject to the doctrine of lis pendens. Legal maxim,  pendente lite, nihil innovetur; provides that as   to   the   rights   of   the   parties   to   the   litigation,   "the  conveyance is treated as if it never had any existence; and it does not vary them."

       16.       It   has   half-heartedly   been   argued   by   Shri   Kapoor, learned   counsel   for   the   respondents   that   respondent Nos.   2   to   6   are   the   first   purchasers   as   there   was   an agreement   to   sell   executed   in   their   favour   on   19.2.1971 and he had taken us through the judgments   of the trial court as well as the First Appellate Court where passing remarks have been made by the courts in respect of the same   on   the   basis   of   the   written   statement   filed   by   the respondent No.1, though this point has not been agitated by   the   respondent   Nos.   2   to   6,   nor   any   issue   had   been framed   in   this   respect either   by   the   trial   court or   as   an additional   issue   by   the   First   Appellate   Court.   In   view   of the   fact   that   the   respondent   No.1   has   been   executing documents   in   respect   of   the   same   land   in   favour   of different   persons   as   is   evident   from   the   record,   the contention   raised   by   Shri   Kapoor   is   not   worth consideration.

       17.       In   view   of   the   above,   we   reach   the   inescapable conclusion that the sale executed by respondent No.1 in favour   of   respondent   Nos.   2   to   6   on   2.8.1971   could   not be   termed   as   a   complete   sale   until   the   document   got registered   on   3.9.1971.   In   view   of   the   provisions   of Section   47   of   the   Act,   1908   the   effect   of   registration would be that registration would relate back to the date of   execution   but   it   does   not   mean   that   sale   would   be complete   in   favour   of   respondent   Nos.   2   to   6   prior   to 3.9.1971 i.e. the date of registration of the sale deed.   In view   of   the   above,   as   sale   stood   completed   during   the pendency of the suit, doctrine of lis pendens is applicable in   the   facts   and   circumstances   of   the   case.   The   courts below   failed   to   appreciate   that   the   fiction   created   by Section   47   of   the   Act   1908,   itself   is   a   consequence   of registration   of   the   sale   deed.     More   so,   as   the   appellant had   been   in   possession   of   the   suit   land   being   a mortgagee   since   1970   and   this   fact   had   also   been mentioned by the respondent No.1 in the sale deed dated 2.8.1971   in   favour   of   respondent   Nos.   2   to   6,   the question   of   respondent   Nos.   2   to   6   being   bonafide purchasers   for   value   and   paid   money   in   goodfaith without notice does not arise, simply for the reason that the said respondents were fully aware that the suit land was   in   possession   of   the   appellant.   Thus,   the respondents   No.2   to   6   cannot   take   the   benefit   of   the provisions of Section 19(b) of the Act, 1963.

       18.       In   view   of   the   above,   the   appeals   succeed   and   are allowed. The judgment and decree of the courts below are set   aside.   The   respondents   are   directed   to   execute   the sale deed in favour of the appellant to the extent of land, for   which   the   agreement   to   sell   was   executed   within a period of three months from today. However, in order to meet   the   ends   of   justice   it   is   necessary   to   hold   that respondent   Nos.   2   to   6   shall   be   entitled   to   receive   the amount   paid   by   them   to   the   respondent   No.1   as consideration along with 10% interest per annum on the same.  The   respondent   No.1   shall   be   entitled   to   redeem the land over and above the  extent  of  land in  respect of which the agreement to sell had been  executed, if any, in accordance with law.  There shall be no order as to costs.




New Delhi, October 8, 2010.




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