RTO Can Cancel Vehicle Registration Obtained On False Documents: Karnataka High Court Upholds Action Against Mercedes Car
The Karnataka High Court has set aside a Single Judge's order that had quashed the seizure of a premium Mercedes Benz AMG G63 suspected of tax evasion using fabricated documents. The single judge had also directed restoration of the vehicle's registration. [2026 LiveLaw (Kar) 272].
The Division Bench of Chief Justice Vibhu Bakhru and Justice K.S Hemalekha however held that the vehicle was registered using fabricated documents and that the transport authorities had acted within their statutory powers.
“…"The respondent[subsequent purchaser] has been unable to produce any material to show that the vehicle in question was registered in his favour on the basis of any sale document executed by either Sri Nihal Ahmed[original purchaser] or HDFC Bank[hypothecated bank]… the State has produced documents, including the sale certificate and the tax invoices purportedly issued by Mercedes-Benz, on the basis of which the vehicle in question was registered in favour of the respondent. If that assertion is correct, the decision of the concerned RTO to cancel the registration cannot be faulted, as the said documents are ex facie false”, the court noted in the order.
For context, one Mr. Nihal Ahmed had originally purchased the vehicle, a Mercedes-AMG G 63, for Rs 1.96 crores, partly financed by the HDFC Bank to the tune of 1.95 crores.
The vehicle was subsequently sold to third parties without the Bank's consent and reached Himachal Pradesh, where it was registered using fabricated documents according to the appellant (State).
According to the appellant, the Delhi Police registered an FIR against one Mr. Harmanpreet Singh Walia regarding fraudulent registration of high-end vehicles. The vehicle was taken into police custody and later released to HDFC Bank by the Chief Metropolitan Magistrate, Dwarka Court.
The respondent-Neeraj Kumar [subsequent purchaser] claimed to have settled Nihal Ahmed's loan with HDFC Bank for Rs 62.5 lakhs and obtained No Objection Certificates from the Bank. Thereafter, he applied for registration of the vehicle in Karnataka, the appellant argued further.
However, Mercedes-Benz Pvt. Ltd. had confirmed that the sale certificate and tax invoices produced were not issued by them to the respondent, the appellants submitted. The court, hence, concluded that the respondent (subsequent purchaser) was unable to prove that he was a bonafide purchaser.
The Court further observed that the NOCs issued by HDFC Bank were of limited import, merely confirming that the loan agreement had been terminated and the vehicle was no longer hypothecated to it.
“…Under the said NOCs, HDFC Bank reported that the loan agreement had been terminated and the vehicle in question was no longer hypothecated to it. There is no document to establish the sale of the vehicle in question by HDFC Bank to the respondent… The respondent has been unable to produce any material to show that the vehicle in question was registered in his favour on the basis of any sale document executed by either Sri Nihal Ahmed [original purchaser] or HDFC Bank”, the court added.
The Court held that the impugned investigation report by the Special Squad [which seized the vehicle in question] dated June 15, 2025, was in the nature of a preliminary report containing factual narration, which should not have been quashed by the single judge bench.
“…a special squad has been constituted under the leadership of the In- charge Regional Transport Officer, Mysore (West) to investigate cases in respect of movement of very high-end value vehicles by evading taxes of the State and also with regard to vehicles registered in other States, but moving within the State. The Special Team comprised of Sri N.Ranjith, Senior Inspector of Motor Vehicles and four other officials…to undertake special enforcement tasks under the jurisdiction of Mysuru City limits…”, the court referred to the memorandum dated 12.06.2025.
Earlier, the single judge bench had noted that as per the statutory guidelines under Section 11A [non-payment of tax] of the Karnataka Motor Vehicles Taxation Act, 1957), only the Regional Transport Officer (RTO) or an authorised Motor Vehicles Inspector is empowered to seize and detain a motor vehicle under specific statutory provisions. The single judge bench had also observed that the scope of the seizing officer [N. Ranjith] was limited to investigation and submission of a report to the RTO, even if the office memorandum instituting the special squad is taken into account.
However, differing from the above view, the Division Bench, referring to Section 11A of the Karnataka Motor Vehicles Taxation Act, 1957, and Rule 27A of the KMVT Rules, the Court observed:
“…Sri Ranjith N, being an official not below the rank of an Inspector of Motor Vehicles had the necessary authority for taking steps or to undertake the enforcement tasks. These would also include seizure of vehicles where it was found that there was evasion of tax…”, the court further clarified.
Rejecting the Single Judge's finding that the registration cancellation order was passed in 'flagrant disregard' of court proceedings, the Division Bench held:
“…There was no stay order restraining the concerned authorities from performing their statutory functions or exercising the powers under the MV Act. It is difficult to accept that the said order was passed to overreach the proceedings before the Court…”
To recap, during the pendency of the writ petition, the Regional Transport Office, Udupi, cancelled the vehicle's registration on January 16, 2026, under Section 55(5) of the Motor Vehicles Act, 1988, on the ground that it was obtained using fabricated documents.
The Court further reasoned that show cause notices were issued to the respondent but were returned unserved with the endorsement 'no such person in the address', leading the RTO to conclude that the respondent had furnished an incorrect address.
Context & Arguments By RTO
The RTO authority's version was that the vehicle is a high-value Mercedes-AMG G 63, but the sale certificate described it as a GLA 200 GDI underestimating it to a value of Rs 32.15 lakhs.
The RTO also submitted that the lifetime tax payable was 78 lakhs including penalty if the original vehicle is concerned. Fabricated documents including Form No.21 sale certificate, Form No.22 roadworthiness certificate, and tax invoices were submitted by the respondent for registration, submitted the appellant further.
Against the subsequent purchaser Neeraj Kumar, an investigation report was filed on June 15, 2025, which led to the seizure of the Mercedes-Benz AMG G63 bearing registration KA20MH0888.
The Single Judge bench of Justice Jyoti M had allowed the writ petition, quashing the investigation report and the cancellation order, while directing restoration of the vehicle's registration. Aggrieved, the State filed the present intra-court appeal.
Case Title: The State of Karnataka & Ors. v. Neeraj Kumar Sharma
Case No.: WA No.1203 of 2026
CITATION: 2026 Livelaw (Kar) 272